IT Contractors will be keeping a very sharp eye on the recent developments regarding the latest tax changes over the course of the next year. The Travel and Subsistence Consultation closed on 30th September, and although we do not know what the results of this consultation are definitely going to be, it does seem that the changes proposed in this consultation will see any contractor, irrespective of whether they use an umbrella company or their own limited company, unable to claim any tax relief at all on travel and subsistence if they work under Supervision, Direction and Control (SDC).
The changes, which are very likely to come into force as of April next year, are intended to ‘level out’ the financial burden and “address imbalances in the system”; this is particularly referring to the 13% increase in income that IT Consultants have typically seen over the past couple of years.
The tax changes that Chancellor George Osborne has presented will see tax payers across the board paying the same amount of tax on their income, despite their specific differences in wages. This, according to ComputerWeekly.com, is “needed to support tax reform and more scientific and technology research.”
However, the reality of these changes means that tax relief for IT Consultants will become unobtainable for travel and subsistence, while the dividend regime will cut out tax credit entirely, giving the public the first £5,000 tax-free, though tax payers will then need to pay tax back at increased rates.
How Do The New Tax Changes Affect IR35?
So, how does all of this relate to the legislation that most commonly affects contractors, namely, IR35. Some of the proposed changes to the IR35 legislation include stopping the current ‘tax leakage’ of £400 million a year. This, however, could see an increased risk of larger businesses considering smaller, trading businesses to be risks to their tax compliance records.
Further changes could also see the IR35 legislation placing a certain amount of responsibility onto end clients. The discussion paper for IR35 has only just closed, and we are awaiting the Autumn Statement to be updated about both this and the travel and subsistence changes.
What Can ICS Do To Help You?
If all of this seems a little convoluted to you, then you’re definitely not on your own, as IR35 is one of the most notorious pieces of legislation that affects contractors, and such professionals have been campaigning for it to be changed (or simplified) for years. However, until an arrangement can be reached, IR35 is here to stay, and that means it needs to be factored into all ongoing tax changes. As a leading specialist when it comes to helping contractors with their tax, accountancy, and administration, we’re able to provide you with the very best advice and solutions to your tax problems. We provide a number of services that you, as contractors, can take full advantage of, including the following:
- Access to expert IR35, MSC, tax, contracts and compliance advice.
- Access to specialist contractor financial products with ICS Money.
- A free contractor guide to keep you informed.
- Same day processing so you don’t have to wait for money.
If you would like more information about IR35 and how we can help you to maintain your contracting income in the face of the recent tax changes, please contact us today on 0800 195 3750 or talk to us on the chat box. We’ll always be happy to assist you.