Following Chancellor’s Kwasi Kwarteng’s mini budget announcement last week, we wanted to provide you with an update, and focus on the most significant announcement regarding IR35.
We are sure you will agree the announcements last week were more like a full budget, and there are still lots of details to be confirmed.
The U-turn with regards to IR35 was totally unexpected. However, for the avoidance of doubt, the IR35 legislation still exists and has since 2000. Limited company/PSC contractors will be accessing their status themselves from 6th April 2023 as they did prior to the recent changes.
Contractors seem delighted; however we are awaiting further details which could take time. Indeed, the detail may not be forthcoming as it relates to HMRC compliance activity going forward (and HMRC might wish to keep their cards close to their chest). The legislative changes to repeal the 2017/2021 legislation will be fairly straightforward.
However, although the end client may not be assessing the PSC status from April next year, there is still other legislation to consider including, Criminal Finance Act 2017, MSC legislation & general anti avoidance legislation.
The Criminal Finance Act 2017 effectively obliges companies to take responsible steps to prevent to facilitation of tax evasion in their supply chains. End clients will be concerned about this, particularly if the contractor takes a different position on IR35 status without any major changes to the way in which they work.
As a result of laws and obligations we currently believe some end clients will be nervous about this area of potential criminal liability and may not be willing to take everything back to how they were pre the original rule changes.
What ADVANCE are currently experiencing as a result of the IR35 announcement
Currently agencies are being guided by the end client. End clients are not looking to change overnight.
If Status Determination Statements were completed, it is unlikely clients will change any status for that assignment/project. However, there is more appetite to reverse the blanket decisions that saw contractors taking up other payment solutions. Contractors are looking for further information and direction from the agency/client before getting excited.
The driving sector however is excited, and one we expect to see moving quicker than others if blanket decisions were made.
ADVANCE are here to support you and your teams
In an ever-changing industry, we are used to changing and adapting to continue to provide the best, compliant services to you and your contractors. Our agility and expertise enable us to adapt quickly and respond effectively, so that you can rest assured that you and your contractors are in the safest hands.
Although we await the detail, we have our specialist Contractor Relations team to deal with any questions/queries.
We will continue to work closely with our advisors EY & BDO to ensure that we understand all the detail once provided.
We will also work closely with our agency partners and your teams to ensure we are able to provide options for your contractors. We have an established accountancy team already providing our limited/PSC service to hundreds of contractors and is part of our FCSA membership.
We will continue to communicate with all our agency partners and teams throughout the coming weeks and months, and keep you informed of any industry updates.
Get in touch with us if you would like a call to discuss the IR35 changes in further detail. As with all industry changes, we are looking to work with you to ensure we are communicating with your teams and the contractors to keep everyone well informed and educated.
Additional Mini Budget changes
The most significant announcement for contractors was the IR35 off-payroll reforms of 2017 & 2021 are being repealed from 6th April 2023. We believe it is important that the Government provide a clear robust roadmap and certainty to the contracting sector. As soon as we know more, we will provide you with updates.
IR35 still exists, it just means that the old IR35 rules will apply, and the contractors will be accessing their status themselves. In addition to IR35 announcements, please see below overview of some of the other key points;
- 1.25% National Insurance increased cancelled and rolled back from 6 November 2022, and the Health and
- Social Care Levy will not be introduced in April 2023.
- The basic rate of income tax, currently 20% will be reduced to 19% in April 2023.
- The increase in tax on dividends, introduced to match the NIC rise, is being abolished from April 2023
- Corporation tax historically low at 19% was due to rise to 25% in April 2023 for larger companies This has been cancelled.
- 45% high-rate tax will be scrapped, and will instead remain at 40%
- Effective immediately, the zero-rate band for stamp duty has been doubled to £250,000, and up to £425,000 for first-time buyers.
- Other new measures announced by the Chancellor included the creation of Investment Zones in places such as Tees Valley, the West Midlands, Norfolk, and Somerset. Businesses created or moving into these zones will be eligible for significant investment and tax incentives
As ever, please let us know if you would like a call or any further information regarding these changes and how ADVANCE can support you throughout your supply chain.
The ADVANCE Team