The difficulties that limited company contractors have been facing in 2021 are remarkable. First, there is Brexit, then Covid-19 and, who could neglect, IR35 change.
Each change has introduced many snags for the contracting domain; a community that went generally unsupported by the government all through the pandemic.
So with the new year almost upon us, how should this work out? Should contractors get ready for another troublesome year? Or on the other hand, would they be able to move toward January with some positivity?
#1. IR35 will not leave the top spot
We believe that IR35 issues are going to be the same for contractors. It has provoked major disorder and dramatically changed methods of working for different contractors.
HMRC has the right to decide whether you need to pay NICs (National Insurance Contributions) and Tax or not.
#2. HMRC will definitely interfere
HMRC might decide to examine past contracts of somewhere around 6 years to check whether they ought to likewise have gone under IR35. So this could mean a higher tax and a mass instalment for past neglected tax, in addition to fines and interest.
To be honest, HMRC is under the pressure to raise their revenue and for that reason will probably ghost the non-compliant limited company contractors.
#3. The government will have lots of tasks to complete
With regards to IR35, the Boris Johnson led government (with HMRC close behind) has a great deal of work to do in the coming year. Regardless of whether it's upgrading HMRC's defective IR35 tool, CEST, or guaranteeing that organisations aren't completing non-compliant assessments, it's crucial that IR35 stays on the agenda in parliament.
Whether it is the report submitted by Lords on IR35 or the NAO probe into reform will definitely get noticed. The thing that the government needs to learn is how to learn from past mistakes and bring changes that can help self-employed people flourish.
What about the tax avoidance schemes? Well, the government will have to promise to cope up with tax avoidance schemes. Because the umbrella industry is still not regulated by any body/authority; tax avoidance is a major risk to contractors.
#4. False self-employment issue should be raised as well
The government is going to focus on those businesses that are promoting false self-employment and therefore avoid employee tax and other rules.
The absence of statutory rights clarifies why some awful businesses are enticed to show their labour force is self-employed when this isn't true. This doesn’t affect contractors but still, they should be aware of this as it involves the government’s strategy for facilitating tax compliance among genuine self-employed workers.
Let’s hope for the best!
Looking back, 2021 was like a roller-coaster ride for limited company contractors (mostly just down-ride), whether it is off-payroll rules, or the pressure to bring compliance.
We should not neglect the fact that the demand for contractors has significantly risen and this is a ray of hope for many. This shows that the UK contractors just need some regulations, perhaps a little funding and a positive approach from the government to prosper.
Reliasys is an umbrella company offering Full employment rights/Statutory Benefits, Insurance and other perks to all the contractors working under us. Contact us today to see how we can help you!
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