Contract news round-up: what`s happening in the industry right now?
With coronavirus and Brexit dominating both local and national headlines, it’s sometimes easy to forget that other news is happening. But despite the disruptions caused by lockdown and the uncertainties surrounding Brexit, stories such as IR35 reform, Making Tax Digital, and the loan charge still rumble on, with further stories such as government pandemic support developing in the meantime.
To save you the trouble of finding out what’s what on all of these, we’ve put together this round-up to bring you up to speed on the biggest contract news stories that you may have lost sight of when, understandably, your head was elsewhere.
IR35 reforms, as you probably know already, were set to come into effect in April 2020, but they were subsequently delayed until April 2021 as part of Chancellor Rishi Sunak’s package of COVID-19 support measures. This new date has since been cemented by MPs, who voted against another delay back in July.
The reforms will see responsibility for IR35 status determination shift from you, the contractor, to your end client. It will also see tax liability shift, again, from you to your fee payer. Despite coming under fire from pretty much everyone affected, the government is determined to press on, especially in light of the cost of coronavirus on the economy.
At the end of the day, IR35 is a revenue-spinner so short of another global crisis, further delays are highly unlikely.
Government lockdown support
Naturally, COVID-19 has been at the forefront of most contractors’ minds, particularly the support – or lack thereof – from the government. While the self-employed really have had the short straw in terms of government support over the last few months, there is some support out there if you know where to look.
We’ve given a roundup of what is still available, what isn’t, and what is ending soon.
– Self-Employment Income Support Scheme (SEISS). If you are eligible for the second SEISS grant (and limited company directors are not) then you have until 19 October 2020 to get your application in.
– ‘Bounce back loans’. These low-interest, government-backed loans (£2,000-£50,000) offer help for small businesses who have otherwise slipped through the cracks, including limited company directors. MoneySavingExpert’s Martin Lewis confirmed that they can be used to support income.
– Coronavirus Business Interruption Loan Scheme (CBILS). A government scheme to help SMEs access loans and other financial aid, with the government guaranteeing 80% of the finance and paying interest and fees for the first 12 months.
– Universal credit. Means tested benefits should your income be disrupted.
– Employment Support Allowance (ESA). Payments to boost income should you be directly affected by coronavirus, caring for a child who is ill with coronavirus, or self-isolating as advised by government guidelines.
No longer available
– Coronavirus Job Retention Scheme. Also known as the furlough scheme, this support is still being paid to those already furloughed (including limited company directors), but is no longer taking new applicants and will not be extended beyond October 2020.
Making Tax Digital
Making Tax Digital is being pitched by HMRC as a way of making the tax system more intuitive, more responsive and more efficient. It involves contractors using approved software (much of which is available for free) to keep digital business records and send tax updates to HMRC, with the idea being that tax can be paid throughout the year and thus removing some of the guesswork. It falls into two branches:
– Making Tax Digital for VAT – This has already come into effect for VAT-registered businesses with a taxable turnover above the VAT threshold of £85,000. Those below the threshold can voluntarily sign up now, before the mandatory date of April 2022.
– Making – Tax Digital for Income Tax – Self-employed people with annual business above £10,000 will need to follow Making Tax Digital rules from April 2023, although you can voluntarily sign up now if you wish.
The big news around the 2019 Loan Charge is that a campaign to judicially review it under EU law has reached 85% of its funding target. Andrew Earnshaw, spokesperson of Loan Charge Judicial Review EU (LCJREU) commented, “[This] is the last and best hope of challenging the Loan Charge legally and [so we] urge people facing the Loan Charge to chip in and fund it, to make it happen.
“This is the only Judicial Review that if it succeeds, would stop enforcement of the Loan Charge. Other JRs can only challenge certain decisions made relating to it, but would leave the Loan Charge in place.”
This is one to watch as it’s unlikely that HMRC will change its mind on the Loan Charge of its own accord.
Dividend tax increase
At the moment, there has been no confirmed increase on dividend tax, but with government borrowing at an all-time high and a desperate need to claw back some of the money spend to tackling the pandemic, it looks like a likely tax to be hit – and one that will negatively affect the incomes of many contractors, especially when combined with IR35 reforms.
The rumours circulating suggest dividend tax will be brought in line with income tax, something that will be pitched as “fair” by levelling the playing field between employees and the self-employed. However, with great differences in in-work benefits and eligibility for support, this “fairness” is not necessarily all its depicted as. Watch this space.
To keep your finances secure during these times of reform and uncertainty, having appropriate business insurances is a must. At the very least, you should ensure you have the basics included in our standard business insurance package but, if you also want to take away the risks associated with IR35, our IR35 Protect cover is also a must-have as it protects everyone in the contractor supply chain.
Call our friendly team of experts on 01242 808740 to find out more.