Ever since Chancellor of the Exchequer Philip Hammond came into power in 2016, major announcements have been made, one being that the Spring Statement would no longer be a “major fiscal event” but simply be an event to discuss longer-term issues.
This shift in Budget thinking places less stress on the country to make tax changes as United Kingdom is the only advanced major economy to do this twice a year – until now. But the Spring Budget 2018, slated to come out next month, is going to be bring with it another wave of change.
And that change is regarding the IR35 consultation. The latest HMRC Forum, held on 11 December 2017, inferred the reforms will be rolled out as early as April 2019. However, the move has met with much criticism.
The fact that the public sector reforms were brought into function less than a year ago, it isn’t fair to assess their success prematurely and repeat the same in private sector. Either way, the contractor community has taken a hit – especially in the health care sector.
And only time will tell of the impact the private sector contractors and freelancers will have once the legislation takes over the private sector.
What has IR35 reforms meant for public sector contractors?
- Public sector bodies are now taking a risk-averse approach and ruling contractors inside IR35, when they could be outside the legislation.
- There are many contractors who are recognized within IR35 pay tax and National Insurance but don’t have the same right as employees.
- HMRC’s online testing tool to check employment status has not exactly garnered followers.
- Tax avoidance schemes are being promotion to contractors so that they fall invariably inside IR35.
How should private sector contractors start to prepare?
Private sector contractors should be hopeful about the upcoming reforms but they should also be realistic and plan for the worst. It is obvious to be concerned about the compliance burden and tax liability risk, and that’s why it is advisable to seek consultation to ensure accurate career-related decisions are made.