The year 2016 was covered with a slightly thick blanket of negativity for contractors. From the reforms of IR35 in the public sector to the impactful Apprenticeship Levy – there were other such changes announced in the Autumn Statement in November 2016. These not only became headlines last year but also are now set to bring a change in the way the flexible public sector workforce is being perceived.
Confirmed: IR35 reforms to be enforced from April 2017
It’s now the responsibility of the fee payer (recruitment agencies or trusts) to determine whether or not a contractor is operating inside or outside IR35. This means the public sector bodies will apply a risk-adverse approach to steer clear of any issues that HMRC might raise. Therefore, there’s a high chance of a mass of contractors assessed to be inside IR35, and unfortunately, you can be one of them.
No more 5% tax-free allowance
Another unfavourable announcement made in the Autumn Statement was the removal of this allowance that every limited company contractor operating a deemed salary payroll and working in the public sector benefitted from. Would you be willing to work without the 5% tax-free allowance that was possibly left to offset the disadvantages of working as a contractor?
Increased VAT for contractors, lesser savings
A new 16.5% rate on the Flat Rate VAT Scheme from 1 April, 2017 for businesses with limited costs has been introduced, and by nature of work, people affected will also include a vast majority of contractors. Although this step is taken to tackle abuse of VAT Flat Rate Scheme, it basically removes the benefit of FRS for contractors as there would be little left to save.
Apprenticeship Levy to hit the fee payers, contractors will feel the ripple effect
Due to this development, contractors will now be given an ‘employee’ status from a taxation perspective by the recruitment agencies. This means you will appear on the payroll as such and this could increase the payroll to apprenticeship levy trigger amount. It is also confirmed that the annual levy allowance will increase throughout the year and hence, operate on a monthly cumulative basis.
Talk to us, sort out your taxes
Even though all is not hunky dory in the world of contracting, we still feel there is hope and that is why we want to reach out to you. As always Bradleys Accountants Ltd. is offering bespoke advice to hundreds of contractors and working very closely with healthcare recruitment agencies to ensure they are compliant with the new changes.
Now that self-assessment is also looming, we feel it is best for you to pick up the phone and give us a call us on 020 3507 0087. We can discuss not only your tax returns but also your next course of action in the new financial year.