Chancellor Philip Hammond presented the Autumn Statement to parliament on Wednesday this week in which he made announcements regarding wages, transport and housing to name a few.
Contract workers however were more concerned with changes to IR35 legislation and how they would be impacted following the Autumn Statement. Whilst more clarification is awaited we have summed up the basic implications to assist in understanding announcements relating to IR35, Flat Rate VAT Scheme and Insurance Premium Tax increases.
What did the Autumn Statement reveal for contractors?
In this year’s Autumn Statement not a lot has changed with IR35 legislation in general, but for contractors working in the Public Sector it’s another story. It was confirmed that from April 2017, the responsibility and liability for IR35 in the public sector will shift from the contractor to the “paying agent”. As part of the reform, PSC’s in the Public Sector will no longer be entitled to the 5% tax free allowance for administration expenses.
It appears the UK is experiencing a shift from having one of the most flexible freelance labour markets to having one of the most ridged and inflexible to ensure contractors in the public sector are paying the right amount of tax.
This will have implications on recruitment agencies who will now be responsible for ensuring their contractors have the right tax status. Failure to do this will see them incur fines from HMRC.
Flat Rate VAT Scheme
The government will introduce a new 16.5% rate affecting labour-intensive businesses where very little is spent on goods such as IT contractors, accountancy firms, consultants. The new rules start on 1st April 2017 but may also affect invoices issued and goods bought from now on. For further clarification please refer to the HMRC website.
There will be further clarification on these measures in early December but as things stand the news for UK-freelancers operating in the Public Sector is not welcomed.
Insurance Premium Tax
On a separate note, Insurance Premium Tax ( IPT ) will increase again by 2% to 12% in June 2017 and whilst the Chancellor is right in saying the UK has some of the lowest IPT rates in Europe it is the third increase in 18 months . The increase will be felt by individuals and business across the UK.
It is clear that there will be challenging times ahead, not just for the freelance community, but for intermediaries, professional advisers and end clients.
Caunce O’Hara has provided bespoke insurance schemes to the UK-freelance sector for twenty years and currently we are committed in the provision of innovative insurance solutions that are designed to protect you and your business. Now, more than ever, is an opportune time to address your current insurance portfolio and we have a team of dedicated and qualified advisers on hand to guide you through these interesting times.