No one could have missed the change in employment landscape over the last ten years. So many people now no longer fit into the full, temporary, part-time employee business model, that all of parents would have recognised. In those structures, your tax and NI would be faithfully deducted for Her Excellent Majesties Revenue and Customs.
The rise of the gig economy and a lot of us now working independently for ourselves, as resulted in more flexible working patterns, where we invoice as companies and sort our own tax and NI out, via an (expensive) accountant. This can be evidenced by the latter, sprouting up on many high streets, in what used to be the video rental shop.
Within SocialHousing, the 1% rent cut and other factors has meant that many experienced staff took voluntary redundancy and went to being self-employed. In a few cases, I have been at someone’s leaving do one week, to be back working with them as they are back on similar pay, for just three (not five) days work. Why wouldn’t you do that? For the organisation themselves, it’s probably a win-win, as from one budget a person’s salary has been saved (yay!), and consultancy payments probably come out of a completely different budget (yay!).
There have been past cases where individuals have worked ‘under contract’ so to speak, but to all intents and purposes, were really employees, in the eyes of HMRC. The perception that some interim managers and contractors, were not paying their fair whack of tax has been reinforced by “bad press”. For example in the case of Ed Lester and the Students Loans Company in 2012, where he was Chief Executive but paid through a Personal Service Company.
Since 2000, a regulation called IR35 has been in place to determine if contractors, are in fact that or employees. If a contractor works too much in a particular place or does not work with a changing set of clients, there are a number of tests to determine your IR35 status.
From April 6th 2017, new Public Sector regulations are expected, which means that the client you are working for, is responsible for determining the IR35 status of the work that you do. Many might take the path of least resistance and revert to paying the contractor or interim, directly with NI & tax deducted. This might have tax implications for many. Transport For London, has already acted in this area.
If you are a contractor / consultant / interim, doing long term contracts, it may be worth your while boning up on these changes - Here.
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The Beatles – Taxman.
(c) Tony Smith, Acutance Consulting www.acutanceconsulting.co.uk 07854-655009
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