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As most people involved in the contract market will know, the Off-Payroll in the Private sector (IR35) legislation was delayed in April 2020 due to the Covid-19 pandemic but, sadly, is due to go live in April 2021. One thing that this legislation will spawn, as the Off-Payroll in the Public Sector did in 2017, is a raft of tax avoidance schemes that will appear to be legitimate but aren’t. Unscrupulous operators will set up what will appear to be honest and lawful umbrella companies but will promise a take-home pay rate of 80 or 90% of gross pay. As always, anything that appears too good to be true is either not true, or illegal! The most likely way they will do this is to convert your income into a ‘loan’ and use this as a method to avoid paying National Insurance and Tax. However, these schemes are not legal and HMRC will close them down and come after you for underpaid tax – it is likely that you will end up paying more than you should have done in the first place. Note that some of these schemes will claim to be HMRC approved – HMRC does not approve tax avoidance schemes. Be wary of any agency that insists you use a certain umbrella or scheme in order to secure a role, and don’t presume that just because a fellow contractor uses the scheme that it is safe – they may have an incentive to get you on the scheme or may not be aware themselves of the huge risk and liability they face. A reputable agency is likely to ask you to only use an FCSA approved umbrella as this will give all parties protection in knowing that it is acting lawfully. Make sure you do your research and don't believe anything that looks too good to be true! We can supply you with details of a number of FCSA approved umbrella companies and are happy for you to decide which one to use.

With video interviews becoming the new normal we wanted to share our top tips to ensure you are fully prepared for your upcoming video interviews! Test your webcam and access to the interviewing platform prior to your interview. Technical issues are the last thing you need when you are already nervous! Dress appropriately, you never know what you might need to grab during the interview and those Mickey Mouse PJ bottoms might not make the best impression! Make sure you have good lighting, this applies to a room being too bright or too dark! Find a quiet part of your house! It's difficult enough working from home, and add in kids with the summer holidays and you will need minimal distractions! Close all unnecessary tabs and applications on your computer or laptop. You don’t want pings and dings going off to distract your attention. ! Have a pen and pad to write notes and your CV for reference to hand! Smile, nod, listen, and use hand gestures when needed! This will give more body language signals and show you are engaged! Turn your phone on silent and/or put it in another room! GSA Techsource offer a range of video interviewing tools that will add value and speed up your interviewing and onboarding process, to find out more call Lauren on 01534-250555

As I am sure you are all aware, the private sector IR35 reforms have been put on hold until April 2021. What contractors must remember, however, is that IR35 has not changed, just who makes the determination, and how payment is then made. As it stands, it is for the contractor to determine whether or not they are caught by the IR35 legislation. A key to showing that you are legitimately working outside IR35, is to be able to demonstrate you are operating as a business in your own right and therefore not an employee. Holding business insurance has always been a helpful indicator (not the only one) of being in business on your own account. It clearly demonstrates that you are taking on contractual risks and liabilities as you are taking steps to protect your business. The taking on of discernible financial risk is a key indicator of working outside IR35 and the fact that professional indemnity insurance is held demonstrates a financial obligation and responsibility to protect your interests. It’s good business practice to ensure you are taking responsibility for your work and actions, and it protects you should anything unforeseen go wrong. It’s an added bonus if it helps indicate your IR35 status as well. As part of our compliance process, and a requirement of our contract terms, we ensure that our contractors hold the appropriate level of business insurance, however, it is something every PSC should hold for very clear reasons.

It is with great sadness and a heavy heart that I write this. Over the weekend, following a sudden illness, I lost my friend, business partner, mentor to our wonderful team, and mother to the beautiful Milli. Jayne and I have been on quite a journey over the past 9 years, through tough times and great times, ups and downs, seen people come and go, and watched many flourish and grow into amazing colleagues and friends. Our business is people, and Jayne was just the most wonderful, loving and infectious person any of us could ever meet. This is clear from the incredible outpouring of condolences from friends, clients, colleagues, and many, many more besides. Our team is devastated by the loss but I know Jayne would be proud of the support they have shown each other, even in this strange, remote world we find ourselves, and the courage they have shown to pull together to ensure the legacy that we have built together continues to grow and flourish. Jayne instilled in the team a quality to deliver the best service possible to candidates and clients alike, and it is a testament to this that they continue to work as hard as ever to help our clients in this difficult time. Nothing less than Jayne would expect! Jayne will be sorely missed, but never forgotten, and will be forever in our hearts. Rest in peace, my dear friend.

I think I, along with thousands of others, jumped with joy at the announcement yesterday evening by Stephen Barclay MP, the Chief Secretary to the Treasury that the impending off payroll legislation known as IR35 would be deferred until April 2021. As good as this news is, we should never have reached this point with the legislation. The contract community and the wider business community have been arguing for the past 18 months (at least) that it is no fair and is not fit for purpose (as we have seen in the public sector). It’s difficult not to feel that HMRC knew it was a pile of the proverbial a long time ago but wasn’t prepared to lose face by delaying it and simply carried on with it, and now they have a convenient get out by blaming it the current coronavirus emergency. For anyone following IR35 closely, you may have read that the House of Lords ripped HMRC and the IR35 legislation to shreds over the past few days. HMRC was incapable of justifying many points raised by the Lords. I am fully aware of the vast amount of time spent in preparation for April 6th 2020 but agencies, clients, umbrellas, accountants and contractors, the cost of which is immeasurable. Just like in April 2017 when we got sight of the final public sector legislation 2 weeks before the April 6th deadline, we now have clarity just over 2 weeks before the private sector deadline. Maybe HMRC and Gov work in a parallel universe where business has nothing better to do than to react to legislative changes at the very last minute. Let’s hope that the next 12 months give HMRC time to make the legislation more realistic, fair and workable for all. I’m not holding my breath.

Until April 2020, when the Government will implement this new legislation, it is the contractor’s responsibility to determine whether they are operating inside (also known as caught by) IR35 or outside IR35, and whether the same tax should be paid as if the contractor was employed by the end client. Should HMRC decide to investigate the true workings of their contract and find the contractor had made the wrong determination then their personal service company is liable for any unpaid taxes. From 5 April 2020 the responsibility, and therefore any potential tax liabilities, falls with the engager if they are medium or large, (small businesses are exempt, more specifically those where two of the following apply – turnover less than £10.2m, balance sheet less than £5.1m, not more than 50 employees). The company paying your personal service company (generally the agency) will be liable for submitting the Income Tax and National Insurance that becomes payable if the role is considered inside IR35 (the same deductions that would be made if a contractor deems themselves caught under current legislation). It will receive confirmation from the end client who will have a legal responsibility to provide that opinion, or determination, for the role. This means that if your end client is medium or large, it will have to undertake an IR35 assessment for each assignment and decide whether you are operating inside or outside IR35. HOW WILL THIS AFFECT YOU? The changes apply to those working through a limited company. They will not make any difference to workers using an umbrella company as all income is already taxed as employment income. WHAT WILL THE EFFECT BE? If the assignment is deemed outside IR35 then the director/shareholder can continue to extract profits in a combination of salary and dividends. If the assignment is deemed inside IR35 then all of the fees will be subject to income tax and national insurance. Simply put, VAT is paid on the gross amount, the employer’s NI (your PSCs NI) is paid over by the agency, along with employee’s NI and PAYE, and you are paid the net plus the full VAT figure. No more tax (ie corporation tax, dividend tax) is due on this payment and it can be taken straight out of your company. Your pay rate will be lower than if it was outside IR35 with this difference being the Employer’s NI (and Apprenticeship Levy if applicable depending on the size of the agencie's staff and deemed payroll). A LITTLE MORE DETAIL: For example, a contractor caught inside IR35 who is used to earning £500 per day outside IR35, is likely now to be offered a rate of around £435 per day inside IR35 (the difference being the submissions that agency needs to make to HMRC for Employer’s NI, as well as the apprenticeship levy if it applies – this is no different from paying £500 per day and the PSC submitting the Employer’s NI – it’s just that this now has to be made on the agency’s ‘deemed’ payroll (the contractor is classed as a ‘deemed employee’). From the £435 per day, employment deductions of Employee’s NI and PAYE will be made, before the ‘deemed’ payment is made to the ltd company. If one simply compares £500 per day to the new payment of £435 less deductions, then clearly there is a significant difference. But it is not that simple as there are other rules / obligations that need to be considered. For those INSIDE IR35: Your company is paid the Deemed Payment (the net payment after deductions made to the contractor’s ltd company): Once the deemed payment is made to the ltd company, you still need a way of taking that money out of your ltd company. This can be done in 2 ways: 1. Dividends: If you’re a director of your own company, you might choose to pay yourself a dividend from the company’s profits. You can pay yourself a tax-free dividend up to the total of the deemed direct payment received from contracts in the public sector, where Income Tax and NICs have been deducted at source. You don’t need to declare that dividend on your Self Assessment tax return. 2. Payroll: You can pay yourself for the work provided to your client through your company’s payroll. As employment taxes have already been paid on the amount your intermediary (your ltd company) receives, you can pay yourself that amount without deducting Income Tax or NICs. And the icing on the cake: No Corporation Tax… When you are calculating your company’s turnover, you should deduct the VAT exclusive amount of the invoice, which is the amount from which Income Tax and NICs were deducted at source. Your company accounts should show this deduction to make sure the amount is not taxed twice. So to put it simply, the amount paid to you by the agency is yours to take out of your PSC (your ltd company) WITHOUT ANY FURTHER DEDUCTIONS. For those OUTSIDE IR35 To get your £500 per day out of your ltd company, again you can pay yourself dividends, or a salary (or mixture of both) Dividends: The tax advantages between dividends and salary are diminishing but, nevertheless, there is still a slight advantage to dividends. As opposed to the Inside options above, your dividend will be liable to dividend tax, AND corporation tax. Payroll: You can take it as salary – but your company will be liable for Employer’s NI (aha, so there’s the difference between the £500 and £435 already gone), then there are the same NI and PAYE deductions taken that were taken for your deemed payment, meaning that if you were to pay yourself purely by means of a salary, your take-home will be the same as if you received the deemed payment from the agency. And to keep things really simple, using a compliant umbrella company means that the legislation will not apply, you will not have the headache of running a company, and your net pay will be virtually identical to a deemed payment.