psc Articles

The coronavirus outbreak presents a special kind of business crisis for limited company contractors.

Many industries have already experienced a sharp contraction and analysts suggest that things are going to get worse before they get better. Thankfully, however, they’re also forecasting a relatively quick turnaround. 

Businesses that were viable before the international pandemic will be viable again, limited company contractors just need to keep their personal service companies (PSCs) going for long enough to see the economy return to pre-crisis levels.

We would like to share some tips to help your business and your family keep going.

Reforms to ‘disguised employment’ IR35 rules were introduced in the public sector this year. The new rules caused confusion amongst recruiters and lead to a take-home pay cut for many contractors.

Now the Treasury has dropped its strongest hint yet that similar reforms could be introduced in the private sector – with the potential to affect millions of contractors and freelancers. 

It’s a question that many limited company contractors will be asking in the coming months as impending changes threaten some of the biggest financial advantages that come along with limited company status.

For public sector contractors operating through personal service companies (PSCs) the changes could prove catastrophic.

The big shift concerns the IR35 status of public sector contractors – specifically, who judges a contractor’s IR35 status. From April, the responsibility for judging IR35 status will pass from the individual contractor to the hiring public sector body or agency charged with recruitment.

As a result, more contractors will be ‘caught out’ by the IR35 rules. Anyone ‘caught out’ by the changes will be reclassified by HMRC as being in ‘disguised employment.’ This means they will be taxed as if they were regular employees.

The Chancellors fourth Budget in 12 months arrived on Wednesday and it confirmed a number of policy changes that we already knew were going to arrive. Restrictions on Travel and Subsistence tax relief for IR35 contractors and changes to the dividend tax will take effect as planned in April.

The most significant new announcement will be of concern to contractors working through a personal service company (PSC) in the public sector.

An HMRC policy document reveals that from April 2017, public sector organisations will be responsible for enforcing IR35. This marks a significant change from the current system, whereby the PSC or agency judges whether a contractor is caught out by IR35.

Effectively, this means that many more public sector contractors will fall under the remit of IR35 legislation and will receive less take home pay as a result. This change is scheduled to take effect in April 2017 following a consultation.