IR35, dividends and expenses targeted in Chancellor’s Summer Budget
Contractors have been attacked on multiple fronts by a host of government measures introduced in the Chancellor George Osborne’s Summer Budget. IR35 is to be reviewed by HMRC to increase its tax yield, while contractors will face tax hikes of 7.5% on all dividends from April 2016. Meanwhile, a consultation on expenses abuses by umbrella company and personal service company contractors is planned to restrict tax relief on expenses. “[The measures] demonstrate breathtaking duplicity from a government that only last week promised to review the challenges facing the self-employed,” highlights ContractorCalculator CEO Dave Chaplin. More1
IR35 to be focus of HMRC review as part of Summer Budget plans
Contractors learned that HMRC will yet again review IR35 in the Chancellor’s Summer Budget this week. The objective of the review is to increase IR35’s effectiveness and improve its tax yield, as it is estimated to cost the Treasury over £400m a year. The decision was welcomed by ContractorCalculator CEO Dave Chaplin, albeit with a hint of scepticism: “We welcome any review of the existing legislation, as IR35 in its current form is not fit for purpose. However, my concern is that the government believes a reformed IR35 will magically generate an additional £400m in tax revenues, but this just won’t happen.” More2
Contractors hit with 7.5% tax increase on dividends from April 2016
Contractors are set to suffer tax hikes of 7.5% on all dividends from April 2016. This was the third and potentially most painful of the major announcements affecting contractors made by the Chancellor in his Summer Budget. Contractors paying basic rate tax will pay an extra £2,025 in taxes, taking their marginal rate of tax up to 26%. For higher rate tax payers, the extra 7.5% comes to an effective marginal rate of tax of 46%, which will exceed the amount that employees pay. “This is a cynical ploy by the government that enables it to tap contractors and all small business owners for extra tax without breaching any of its pre-election promises,” highlights ContractorCalculator CEO Dave Chaplin. More3
Contractors accessing pension cash without advice risking poverty in retirement
Contractors who are looking to use the April 2015 pension reforms to access their pension pot might be putting their retirement income at risk unless they seek professional pensions advice from a financial advisor first. This is according to Contractor Wealth’s pension expert Angela James, who claims contractors need to seek personalised advice to avoid jeopardising their retirement: “Contractors need to seek guidance, but this is not the same as advice. Guidance is just pointing out some basic facts. Advice is a specific course of action designed for an individual by a qualified professional based on specific circumstances, with full recourse.” More4
Skill shortages in core sectors continue to work to contractors’ advantage
Contractors working across the core contracting disciplines are benefitting from increasing demand as a result of the continuing skills gap, according to the Recruitment and Employment Confederation (REC)/KPMG Report on Jobs for June 2015. The report claims that there will be ongoing candidate shortages, despite contractor billings falling to an eight-month low, with engineers becoming particularly hard to come by. “This growing skills shortage is cross sector and cross discipline: recruiters are struggling to fill vacancies for everything from software engineers to sales,” notes KPMG partner Bernhard Brown. More5
Contractors to see benefits of income tax and NIC merger in new OTS report
Contractors will for the first time see the benefits of merging income tax and National Insurance Contributions (NICs) following the completion of a new project by the Office of Tax Simplification (OTS). As well as being granted additional resources, the OTS has been asked to research the topic and focus on “the issues and impacts rather than make specific recommendations”. The OTS has also been asked to complete a review on the taxation of small companies. More6
Contractors in Germany enjoying ‘above-average’ pay rises
Contractors in Germany are benefitting from accelerated pay increases, particularly in the former East Germany, says Germany’s association of temporary employment agencies (iGZ) in a report published by Staffing Industry Analysts. The increases are part of a convergence plan to align the differing wage levels that have existed between East and West Germany since their reunification. In July 2010, highly skilled contractors could earn a minimum hourly wage of €17.38 in the West and €15.12 in the East. Under the current collective agreement these have increased to €19.55 and €17.39 respectively, with further rises set to be implemented in June 2016. More7
Sharp growth in UK contractor recruitment sector over past 12 months
Contractor demand increases over the past year have been substantiated by reports that the UK contractor recruitment sector has recorded its third straight year of growth. More than 80% of recruitment firms reported an increase in net fee income in 2015, with average weighted growth of 12%, according to business advisory firm Deloitte and the Association of Professional Staffing Companies (APSCo). The trend looks promising for contractors, with the statistics corresponding with the upturn in pay-rates that contractors have recently been enjoying. “This can only bode well for the overall economic landscape,” highlights Ann Swain, chief executive of APSCo. More8
Oil and gas contractors to counter-intuitively benefit from further industry job losses
Contractors in the oil and gas sector could be set to benefit from further job losses in the North Sea. A report by the London Evening Standard shows French services firm Technip has announced that it will be cutting its headcount by 6000 to cope with lower oil and gas prices, leaving the door open for contractors to fill the void left by the loss of man-power. This news comes one month after the Aberdeen & Grampian Chamber of Commerce (AGCC) highlighted the opportunities available to contractors despite the oil and gas sector’s global downturn. More9
Contracting prospects continue to improve in the Netherlands
Contractor opportunities in the Netherlands continue to show improvement, as statistics show there were 9% more hours worked by temporary workers through May and June than at the same point in 2014. Staffing Industry Analysts reports these latest figures from the Dutch Federation of Employment Agencies (ABU), which show that sales also rose by 10% on last year. Contractors working in the technical sectors enjoyed the most growth in demand for their services, with 23% more hours worked and a 20% increase in sales. Meanwhile, hours in the industrial sector rose by 6%, while the administrative sector witnessed a 10% rise. More10