IR35 is a perennial pain in the rear-end for the freelancers and contractors of the UK – not least because it is so opaque. We recently covered all the IR35 twists and turns in 2011, and now we bring you news of 2012′s first IR35 malfeasance.
The choice between sole trader and limited company is one of the most fundamental faced by any freelancer. Do you incorporate, deal with the extra bureaucracy and keep more of your money as a reward? Or do you stay a sole trader, pay a bit more tax but not have to deal with Companies House?
We recently reported on the Government’s tentative plans to introduce a General Anti-Avoidance Rule to tackle tax avoidance. A GAAR has been discussed in the past as a potential replacement for IR35, so the prospect of its introduction had the potential to rid freelancers and contractors of an unwanted headache.
This is certainly the first time we’ve heard a company website advertised as a way to help your cause in an IR35 status dispute, although in theory it could fall under the Direction and Control IR35 tests – if a worker is an employee, they wouldn’t have a website – right?
With the first twelve weeks of the AWR finishing on 23rd December 2011 – when in theory all agency workers will have ‘equal’ treatment rights to pay, holidays, hours of work etc. – we take a look at the impact of the Agency Workers Regulations so far – what’s good, bad and downright dodgy!
For a long time a General Anti-Avoidance Rule (GAAR) has been touted as a preferable alternative to IR35. General Anti-Avoidance Rules are used in Canada and New Zealand, and form a set of principles rather than hard-and-fast laws. It’s introduction would allow fresh case law to be established around disguised employment and limited company contractors, and hopefully allow HMRC to avoid the mistakes of the past.
With the first twelve weeks of the AWR coming to an end on 23rd December 2011 – when in theory all agency workers will have ‘equal’ treatment rights to pay, holidays, hours of work etc. – we take a look at the impact of the Agency Workers Regulations so far – what’s good, bad and downright dodgy!
All’s been quiet on the IR35 front recently. Since news of HMRC’s woeful enforcement record surfaced late last year, there’s been a relative dearth of IR35-related tomfoolery, instead most compliance related head-scratching has been directed towards the Agency Workers Regulations.
Recently, Freelance Advisor reported on the very important Supreme Court 2011 legal judgement on Autoclenz Ltd v Belcher and Others and how this may affect freelancers and contractors who have IR35 concerns. As this case is so important for all employees, workers and freelancers in deciding their employment status, at Workline we thought we’d explain this in more detail.
The case highlights the importance the Courts now give to finding clarity in employment relationships, not by looking at what is written down in a contract, but what is actually happening in the working relationship.
In part two of our freelancers survey results we explored how a freelancer’s relationship with their accountant can change the way they work, and their knowledge on industry matters. In part three we’re going to cast a beady eye over whether freelancer’s service costs are going up as the recession continues, and what proportion of those surveyed are looking to change the way they work.
We recently highlighted how red tape is putting off small businesses taking on staff. Another area of huge concern and confusion is what paperwork you need to give your staff to ensure your working relationship is clear and unambiguous. We give you the low-down here!
In part one of our freelancer survey results we gave a broad overview of the results – whether people incorporated, if they used a local or online accountants, and if they understood IR35. In part two we’re going to “drill down” into the results a little more and examine how your relationship with your accountant changes the way you do business.
A little while ago we ran a reader survey to find out a little about how the UK’s freelancers run their businesses, how they regarded their accountants, and what they thought of industry worries such as HMRC fines and IR35. We’ve finally managed to dive into the results and pull out some interesting titbits.
The saga of IR35 is full of twists, turns, loop-the-loops and groin-kicks, and doesn’t show any sign of letting up soon, following George Osborne’s decision to take the path of least resistance in his 2011 Budget. Following a freedom of information request from the PCG, HMRC has divulged some interesting figures which shed some light on HMRC’s tremendous mis-management of IR35.
Many new freelancers and contractors may be vaguely aware of IR35, but not know when and where it applies. Before getting too intimate with the ins and outs of the IR35 legislation, the first step is to know if IR35 is even relevant to your situation.
After being blasted for their performance in 2010 in a report from the Treasury select committee, HMRC Chairman Mike Clasper has issued a public apology, and has pledged that the taxman’s performance in 2011 will be radically improved.
A study by the Forum of Private Business has found that small firms are spending more time and money complying with Government legislation than ever before, with a massive 84% of businesses saying they have increased compliance activities since 2009.
Yesterday the Supreme Court handed down its ruling in the case of Autoclenz Ltd v Belcher and Others, and set a worrying legal precedent for freelancers and contractors worrying about their IR35 position.
Many Contractors choose to use the services of an existing ‘Umbrella Company’ – they are limited companies that employ Contractors. If you choose to do this, your contracts will be treated for tax purposes as if they are all inside IR35.
This is a difficult and potentially time-consuming process. Long-term freelancers will certainly wish to ‘IR35-proof’ their contracts in order to avoid the reduction in earnings. Contracts will need to be checked for each job/project and they should highlight your status as a self-employed professional.
Last week the UK’s coalition Government came under criticism from the Institute of Directors, a group representing business leaders across the country, for failing to reduce the tax burden faced by small businesses.
There are 3 basic ways you can be employed in the UK – as an Employee, as a Worker or as Self-Employed/Freelance. However, Contractors can be either a Worker or Freelance, depending on how they are employed on each job. Read on for more information!
Last week marked the first meeting of the IR35 Forum, a carefully-selected group of freelancing, contracting and employment experts gathered by HMRC to aid their faltering IR35 reform attempts. Following the OTS report of small business tax reform and the Government’s subsequent inaction at the Budget, the forum was put together to look into better ways to administer the so-called “Freelancer’s tax”.
Following the OTS report on small business tax simplification and the Chancellor’s subsequent lack of action, HMRC has formed the IR35 Forum – an expert group of employment and tax specialists – to look into potential reforms to the much-reviled legislation. Following the Forum’s first meeting in early May, the Association of Professional Staffing Companies (APSCo) has now been invited to join.
This month Andy and Jon talk to Simon McVicar of the PCG about the latest developments on IR35, and how the PCG are attempting to advise the UK’s Government on future reforms. We also get an accountants perspective on how the changes brought about in the Budget will effect the nation’s freelancers from Steve Crouch of Crunch Accounting. This is a long one, so pour yourself a cup of tea.
Jon Norris | Guides,Legal,Money
It’s the freelancer’s perennial quandary – should I stay as a sole trader, or form my own Limited Company? There are advantages of both, but also some drawbacks to be aware of. Remember every situation is different – some people may choose to go Limited for the added weight it puts behind their company name, some people may choose not to incorporate to as they don’t earn enough to take advantage of the added tax efficiency.
Making sure you have an airtight contract in place before you start work for a client is important – perhaps the most important aspect of doing work as a freelancer. Without a contract in place you are leaving yourself open for a whole world of financial and legal hurt, and most freelancers learn this the hard way. But what should you include in a contract?
Now that the Budget has come and gone, and the ensuing raft of fiscal and legislative changes has passed us by leaving a sea of confused freelancers in their wake, it’s time to ask if the changes the Government made were the right ones.
IR35; what the hell is going on, apart from nothing? When an accountant first said to me “You don’t know what IR35 is?!” with a look of open mouthed incredulity, I knew right then and there it was going to be the sucky kind of litigious revelation that cost me money and possibly sanity.
Speaking on Monday at the launch of Start Up Britain, a new campaign backed by several big companies to offer help and support to those looking to start their own business, David Cameron announced that, with the help of small business “we can make this decade one of the most entrepreneurial decades in our history.”
Tomorrow is B-Day, when the incumbent Chancellor of the Exchequer and certified man-child George Osborne will unveil his spending and tax plans in all their glory. This budget will guide the UK’s finances for the next year, and the 2011 budget is especially pertinent for freelancers, contractors and small businesses, given the promise of IR35 reform.
Contractor Advisor | Legal,News
Following last week’s publication of the Office of Tax Simplification’s report on IR35, Contractor Advisor looks at the possibility of suspending the employment legislation altogether, and the impact that could have on the self-employment community at large.
Contractor Advisor | Legal,Money
As part of its report on simplifying Tax for small businesses, the Office of Tax Simplification raised two possible short-term solutions. One was to suspend IR35 with immediate effect, and the other was to keep IR35 but improve how it is administered.
Following this morning’s disappointing launch of the Office of Tax Simplification’s Small Business Tax Review, we have now had some more time to digest the whole document, and have pulled out some more snippets that are relevant and interesting to the self-employed community.
Earlier today the Office of Tax Simplification released their report Small Business Tax Review, which is designed to inform the Chancellor’s decision-making process when looking to reform IR35. Although we’re going to look at the report in more detail, a provisional analysis seems to indicate the OTS are not playing the kind of hardball many freelancers and contractors would have liked.
The Office of Tax Simplification (OTS) has published a report on how to simplify UK tax reliefs. It’s a long document which takes a while to rifle through, which is surely a good thing (or not, depending on how much you like reading about complex financial and legal issues).
Completely unscientific of course, but a quick polling of the Twitterverse has yielded some interesting results as to what the biggest annoyances for freelancers are.
The results, somewhat unsurprisingly, focus on the behaviour of certain unscrupulous clients
Last week we unleashed our newest creation – Contractor Advisor – on the world. The reception has been overwhelmingly positive, lots of people have commented on the site’s snazzy design, and everyone is enjoying the content so far. In our quest to provide the ultimate resource for the UK’s growing army of contractors, we’ve first addressed that most pressing of issues – IR35.
As you may have heard, our Government is a little strapped for cash at the moment. Because of this, they have decided to introduce a raft of measures to increase their cashflow. One of the measures being employed by HMRC is the fairly innocuous sounding “Employer Compliance Visit”. Although it may sound like a friendly sit-down over a cup of tea, what it actually means is that HMRC will turn up on your doorstep to check your books.
After locking horns with the taxman for seven long years, freelance contractor Mark Fitzpatrick has has come out victorious in a significant IR35 ruling. And the key to his victory concerned a little concept called ‘mutuality of obligation.’
Fitzpatrick had been accused by HMRC of using his limited company, MBF Design Services, to avoid tax when working for aircraft manufacturer Airbus. In reaching a decision, the tribunal noted a lack of ‘Mutuality of Obligation’ as a significant factor.
There have been some interesting developments of late which shed some light on what the future holds for IR35 – the legislation designed to close the loophole which enabled people to work as independent contractors when, actually, in spirit, being more akin to an employee.
Ever since Chancellor George Osbourne announced a review of IR35 in the Emergency Budget, many in the contracting community had their hopes raised for swift action.
Despite hopes of its upcoming demise, IR35 is still alive and dangerous and remains a major concern for many UK contractors.
That’s why it’s great to hear that a new online tool has been created which gives contractors an opportunity to discover whether or not they are IR35 compliant.
Over the last month the coalition government has been taking suggestions from the public on how they can save money quickly and effectively. Some have argued for the scrapping of the digital switchover while others have suggested making MP’s use hostels rather than a have a second home.
A number of people have also taken the opportunity to argue for the repeal of IR35…
For a long time now there’s been much talk of the drawbacks and benefits of IR35. Well, mainly the drawbacks. But what of the measures that could potentially replace the complex and largely ineffective legislation?
One option which has been spoken about recently, involves the creation of a new General Anti-Avoidance Rule known by its acronym GAAR.
Last week the Government announced a 52% cut in the amount spent on advertising and marketing, leading to 287 redundancies.
One of the few Government campaigns to escape the axe was the HMRC’s ‘paying business taxes’ series of adverts which surely reveals a determination to ensure that businesses don’t escape their tax paying responsibilities. Freelancers and contractors should be on their guard.
IR35 has been the bane of many of a contractor since it was introduced back in April 2000. Recently the controversial legislation has been garnering much media attention after the coalition government promised to review it as part of their plans to simplify the tax system for businesses.
This makes it a good time to ask: what exactly is IR35?
Regulations regarding agency workers in the UK has been a controversial issue for a few years now. When the Conservatives were in opposition, they suggested that they would review the legislation which is due for implementation next year, if elected. But since the coalition government was formed, all has gone quiet.
One man who has the inside track is umbrella consultant Gerry Gregoire. In the following article he gives the lowdown on current regulations and how things may change in the future.
It’s good news for UK contractors after the coalition government’s launch of the new Office of Tax Simplification. The body will be tasked with making the tax system in the UK less complex, which will include a review of IR35.
The swift launch suggests that the government is looking to change the tax system sooner rather than later.
Freelancers and Contractors unhappy with the Labour government’s IR35 leglislation may now be able to see light at the end of the taxation tunnel.
Before the election the Tory team were hinting that they’d “review” IR35 if they got into power, but yesterday saw the first strong commitment from small business minister Mark Prisk.
“We want to make sure that we could undertake a comprehensive review of small business taxation in a way that makes the need for the current IR35 legislation redundant” said Prisk in an interview with The Telegraph.
In case you missed George Osbourne’s Emergency Budget here are the highlights for Freelancers:
In May, the newly formed coalition government wasted no time in making all the right noises regarding the stress inducing IR35 ‘disguised employment’ legislation. Through a combination of squawks, growls and shrill cries they promised to “review IR35, as part of a wholesale review of all small business taxation, and seek to replace it with simpler measures…”
The question is: can we expect any statements of substance regarding the legislation in the upcoming emergency budget?
PCG was established to fight the introduction of IR35, so today’s announcement that it is to be replaced will be welcomed by freelance workers throughout the UK.
In the Coalition’s full programme for Government, published today (20th May) the Government declares it will:
The commitment appears as the fourth of 20 priorities for improving the UK’s ability to do business.
Following an article on Contractor UK’s website last week “Scrapping IR35 is not the answer, say Tories,” PCG, the largest UK organisation representing freelancers and contractors, are remaining optimistic in their campaign to overturn the UK’s IR35 leglislation.
According to a PCG spokesman they have now had a series of “fruitful and productive” meetings with various political parties and they detect from all political sides “a desire for a revision of IR35 legislation”.
With the General Election fast approaching, prospective parliamentary candidates will be out and about, doggedly canvassing on the streets in your neighbourhood.
The Professional Contractor’s Group (PCG) has produced a Guide to possible questions you can ask your candidate should they appear on your doorstep, with useful background information on some of the main issues facing freelancers.
The PCG’s continued lobbying of Tory top-brass has finally paid off in a firm commitment to a review of IR35 legislation by a future Conservative government.
The Conservative Party made the landmark announcement today that IR35 will be reviewed as part of an overall review of small business taxation should they win the General Election in May.
In a letter today to Chris Bryce, PCG Chairman, the Shadow Business Minister, Mark Prisk MP said that due to PCG’s strong representations to him and to Shadow Treasury Ministers “a Conservative Government would undertake a fundamental review of small business taxation matters, including IR35.”
One of the things guaranteed to provoke debate is the whole question of notice periods in freelance contracts. On the face of it, an equal right for you and the client to step out of a contract looks like a good thing to have.
But are they really worth anything?
New in the Freelancer Hot Tub this week:
* Little known ways to find freelance work (Feature)
* 6 things that may happen if you falsely claim expenses
* Potted guide to IR35
* Freelance Rates: What do you charge?
PCG, the representative body for freelancers, contractors and consultants in the UK, has launched its ‘Spirit of freelancing’ campaign to capture thoughts and ideas from freelancers in the run up to Monday 23rd November, National Freelancers Day.
PCG is urging its members and other freelancers to get involved and send PCG their views on what freelancing is all about, what it means to them and how they would define it.
Read on for details on how you can get involved.
The PCG, the association that represents freelancers and contractors in the UK, has revealed the exact amount of money raised by the Government’s IR35 tax regulation rules.
Following a request under the Freedom of Information Act to HMRC, asking just how much tax revenue IR35 raises for the exchequer, PCG have found that between tax years 2002/03 and 2007/08, IR35 directly raised just £9.2 million. This equates to an average of around only £1.5 million per tax year – a tiny sum in Governmental terms.
I talk to Steve Crouch about the latest IR35 case, Dragonfly Consultancy. This case highlights some very interesting points that contractors and freelancers need to consider when embarking on client projects. If you want to remain IR35 compliant, this is a must listen.
The importance of a strong legal framework can never be under estimated when establishing a relationship with a customer. What are we talking about? The key fundamental within business, a contract of course! If you’re mad enough to be working for any customers under a loose agreement or worse still a verbal agreement, stop and [...]
Heard of it? Most have but still it manages to send a shiver or two down the spine of even the most newbie contractor or freelancer who’s not quite sure! So what actually is it? Well essentially it’s the Inland Revenue’s (HMRC) definition of ‘self employment’ and it’s designed to catch those who are [...]
