If you’re currently working as a contractor through a Limited Company, then you may well have caught wind of the fact that the Government is planning some serious changes as from 1st April 2017, to how you are taxed for your work. If you haven’t, then it’s important that you read up on the changes that are planned and how they could affect you so you aren’t caught out.
With that in mind, we’ve put together this article to spell out the main changes, to give you an idea of what’s coming in the near future.
Essentially, the changes are designed around categorising whether certain contractors working through a Personal Service Company are actually effectively acting as employees of the end client. If they are, then taxes will apply much as if the contractor were actually an employee, with tax and NI being deducted before your company receives its payment for work done from the intermediary or end client
For the first time it’s up to the end client to decide if your company is caught by the new rules. HMRC has developed a new tool to help them decide, click www.gov.uk/guidance/check-employment-status-for-tax for the link. At the moment the legislation only applies to companies work for a Public Authority- see above link for the definition
The main issue contractors are concerned about is the fact that their end clients are very unlikely to begin paying employers NI contributions on top of what they pay their contractors - instead, it will likely come out of the contractors earnings. Alongside this, these contractors will not receive any of the standard benefits of being an official employee, although they will expected to take on the tax burdens of one.
This could effectively result in contractors getting paid less than an employee, whilst also receiving none of the benefits an employee does. Needless to say, many contractors are unimpressed with these proposed changes. One of our contractor contacts has created a website which you can view here, where they’ve gone into more detail about the proposed changes, and how you can get involved.
Here at Turner & Turner, we assist many contractors in dealing with their tax affairs as Chartered Accountants. To find out how we could help, why not call us today on 01772 716 555 or fill in our online contact form.