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With that in mind, the Government said that its recent Autumn Statement takes 'a responsible approach to public spending to keep debt falling, cuts taxes for working people and businesses, reforms welfare to help people into work and removes barriers to business investment to boost growth.'
Matt Fryer, Managing Director of Brookson Legal, a law firm with extensive expertise in contractor procurement and IR35 law, and member of the Board of Directors at the Freelancer and Contractor Services Association (FCSA) provides insight on the Autumn Statement for contractors:
Reduction in NI
“This reduction in NI is good news for contractors working via umbrella companies (or those subject to PAYE as a result of the off-payroll rules) and sole traders. For contractors working via umbrellas, the reduction in national insurance will flow straight down to their take-home pay and increase it, making it a nice New Years present for many.
"However, this won’t be the case for the majority of contractors working via a limited company as they typically pay themselves a salary below the employees’ national insurance threshold. For self-employed contractors, this will make working via umbrellas more preferable.
"It is a shame that limited company contractors, who are a critical part of the workforce have once again been excluded from a tax break aimed at stimulating the workforce. There was an opportunity here to increase the dividend allowance or the rate of dividend tax, however, as this would affect investors and larger businesses, it would not have been easy to implement.
"It’s disappointing to see no reference to the proposed regulation of umbrella companies in today’s announcement and it looks as though these proposals have been put on the back burner, potentially until after next year’s expected General Election. This is a much-needed policy to create a level playing field in the sector, particularly around tax avoidance, and to protect umbrella employees from unethical practices. Supply chains need to continue to be wary of non-compliance within the umbrella market and would be advised to take steps to consolidate and audit the providers they are engaged with.”
IR35 off-set rule:
“The offset rule, confirmed by the HMRC to offset taxes already paid for a wrong outside IR35 assessment, is good news for contractors working with hirers and recruiters. This will significantly reduce the financial risk associated with outside IR35 roles, giving end-hirers the opportunity to reassess their policy for engaging with personal service companies and could also result in the removal of blanket bans on PSCs or blanket ‘inside’ IR35 determinations.
"It is also interesting to see that contractors can now take action against clients issuing blanket IR35 determinations by reporting them directly to the HMRC. This will bring about more compliance within the off-payroll working rules.”
Further IR35 information
For more information about all aspects of IR35, including the controversial IR35 reforms and the 'off-set' rule see Shout99's News on IR35 section.
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Susie Hughes © Shout99 2023
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