There are three reasons for this post. First, to briefly sum up two of the specific challenges that will have a major impact on freelancers and contractors in the coming months: secondly, to highlight a massive opportunity for freelancers and contractors to save time and focus on earning more.
The third reason and perhaps the most important is for you to have the opportunity to voice any contractor-related concerns that you might have. We will then endeavour to answer your questions. If we don’t know, we will reach out to our contacts to find you an answer. So, let’s get started with one of the big issues …
April’s changes to IR35
In last November’s Autumn Statement, it was announced that changes to IR35 would take effect from April this year. In particular, this has major implications for contractors working in the Public Sector through a PSC (Personal Service Company). For some contractors, it may result in a significant shift in the way they operate, including how they are remunerated and what expenses they can claim.
If you are operating a PSC and you’ve not assessed the impact for you, call us now – we can help.
In a nutshell, the status of contracts awarded in the Public Sector will be decided by the organisation who pay them – currently, you assess the status of your PSC contracts. Determining IR35 status is a specialist area, we always advise our clients to send us their contracts for review – we’re experts in the field and guarantee the advice we provide. With the responsibility falling to the organisation paying your PSC – can you be sure they will invest the same attention to detail in determining the IR35 status of your contract? Why this matters is that the ‘safe’ call for the organisation is to place your contract within IR35 and tax you as an employee. This will increase your tax liability and reduce your expenses allowance.
I wrote a more detailed post about this in December and my colleague, Louise, has put together a comprehensive presentation that will make IR35 crystal clear.
April’s changes to Flat Rate Scheme VAT
This will impact any business which has chosen to simplify its VAT calculations by adopting the Flat Rate Scheme. From April, businesses that spend less than 2% of their sales on goods (or less than £1,000) will be referred to by HMRC as Limited Cost Traders (this is likely to capture most contractors). These businesses will default to 16.5% under the new conditions, meaning less VAT can be reclaimed.
This calculation also negates the inclusion of costs such as capital goods, sustenance and vehicles expenses.
This is obviously just an overview of the changes as the details can be quite complicated. If you would like some specific advice, we are available to review your individual circumstances: please get in touch.
It is time to get your head (and your accounts) into the cloud
Do you remember (I am mostly addressing the over-forties here) when you swore your business didn’t need a website or an email address? Or do you recall (this is to everyone else) thinking your Nokia 3310 (affectionately known as ‘the brick’) would be the last mobile phone you would ever need?
Eventually, you caught up with the inevitable advances in technology and realised that there were better ways to do business. Finally, you gave in to your fear, caution or outright mistrust and began to enjoy the benefits of the world of smartphone connectivity.
We have been using cloud accounting for our clients for several years now, and I know that some contractors are still resistant to what is a significantly better way of working. I do understand the reluctance (and suspicion) of this mysterious thing called ‘the cloud’ but everyone should at least investigate its potential. Trust me; this can make a huge difference for contractors. Your finances will work for you, giving you time to earn more or enjoy the rewards that contracting promised.
We use FreeAgent for all our contractor clients, and they even get access to it for FREE. Call us today if you would like a free demonstration of FreeAgent (the contractor’s choice in cloud accounting).
Now it’s over to you!
As I mentioned at the beginning of the post, we want to know what your challenges are for the year ahead, as a freelancer or contractor. More than that, though, through this blog we want to address those concerns and roadblocks that are preventing you from working fewer hours, earning more and enjoying the rewards you deserve.
So please get in touch through the social channels below, or directly to one of the team in the office and tell us how we can help you and your peers.