There are two interesting tax developments for freelancers in the past few weeks. One – to Making Tax Digital – is very concrete and obvious, and the other – to IR35 – is a bit more subtle. Bectu members affected by them will probably welcome both.
Making Tax Digital
The first one is that the government has announced a two-year delay (back from April 2024 to April 2026) in the mandate for Self Employed Sole Traders to sign up for Making Tax Digital, and a slightly longer one again for those with lower levels of income (April 2027 for those with £30-50k in income). There will also be a review on when/if to mandate it for those with less than £30k in income.
Given the current rate of inflation, a version of fiscal drag may mean that some of those earning less than £30k now may be over that particular line by 2027! Of course, none of this stops those who actually want to get the compliant software and start using it – either for income tax or VAT.
IR35
The second development is one that may not be very visible, but it will be welcome all the same.
Bectu has had meetings and correspondence with HMRC and one of the points that we have pressed quite hard on has been the need to discourage employers from doing blanket determinations – usually a hasty and risk-averse decision about employment status based on a job-title.
We have urged HMRC to put more pressure on engagers to look closely at the employment relationships in place and Contractor UK is reporting that HMRC asking new IR35 questions of clients whose contractors disputed their status, particularly about their dispute-process and obtaining feedback on the volume of disputes; their outcomes, and if Status Determination Statements were altered. As Contractor UK says….
“But Andrew Webster, managing director of Workwell says it’s fee-payers who need a wake-up call, and now.
“Off-payroll [rules’ reinstatement] has happened,” he wrote online. “Yet a considerable number of UK recruiters still don’t seem interested in understanding which IR35 compliance methodology or provision their end-clients have adopted to determine status.
“That’s even though [in the private sector], we’re now 19 months into an IR35 business-as-usual world!””
As a union, ideally, we would like to see a transparent dispute mechanism in place, but it would be hard not to sympathise with HMRC’s reluctance to go along with this as it would probably create a huge amount of bureaucracy. In particular, Bectu will continue to press to ensure that engagers are encouraged to fully understand the risks and costs that many freelancers incur when working for engagers (and between jobs).