2010 – a year of change and opportunity for contractors?

2010 – a year of change and opportunity for contractors?

Contractors may have breathed a sigh of relief following the pre-budget report having found little changed. However can any tax payer really expect to pay the same tax/NIC post general election?

Considering the state of the UK’s finances the answer has to be a resounding no. The electioneering has begun and we hear calls from one party for a £10K nil rate tax band, accusations from the current incumbents of a forthcoming class war but the emphasis from all three main parties is clearly on fairness.

IR35

Public campaigns for the repeal of IR35 have so far failed. If they had succeeded it would be unrealistic in the extreme to expect in its place a system where less or even the same tax/NIC is generated from those operating through limited companies.

The Agency Workers Directive (AWD) calls for a definition of the genuinely self-employed and suggests that those outside IR35 would also be outside the AWD. This new legislation presents a real opprtunity for end clients and agencies to understand and address the issues of employment status. We could at last see an end to engagers who want all of the controls over the freelancer as an “employer” but with none of the responsibilities that an employment relationship brings. The AWD in its current form also addresses the perceived unfairness with regard to employment rights for those inside IR35.

Umbrella Companies

Arguably expenses for Umbrella users were saved thanks to the Daily Telegraph! The future is the flexible workforce and there is still an important role for umbrella companies to play. HMRC has fired several warning shots regarding Umbrellas use of over- arching contracts of employment and it seems there are numerous ones out there that do not work. Returning to the issue of fairness and the fact that agency workers generally cannot claim expenses the Umbrella user may find him/herself in the same position as the PAYE agency worker.

Changes

Brace yourselves for a change of government, an emergency budget and more tax to pay.

Opportunities

New regulations bring opportunities for education and better understanding of employment status issues by all the parties in the contractual chain which is good news for Contractors.

In the meantime we still have IR35 and Umbrella expenses schemes and HMRC is very much out there using its new powers and spending its enormous budget on compliance work. 2010 is going to be a year for all contractors to take notice of the changes and the opportunities and consider their positions accordingly.

Kate Cotterell is Managing Director of Bauer & Cotterell.
© 2009 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: dice by QwirkSilver

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