Are you Employed, Self-employed or Both?

More changes predicted for Self Employed and Sub Contractors.

As a business owner, I suspect that you pay self-employed consultants or sub-contractors from time to time.

Did you know that earlier this year there were some major changes implemented in the public sector and they are rumoured to be hitting the private sector in due course and in this article I want to make you aware of them.

Historically, the onus on deciding whether an engagement with someone self-employed was with the sub-contractor if they traded via a limited company.

April this year saw the rules changed in the public sector and now the onus is with the public body making the payment and not with the sub-contractor.

Since then we have seen many examples of businesses who have operated for years happily outside this remit, known as IR35, to those in the scheme, and this was legitimate and above board. Now suddenly, they are being brought into this net and their employment status is being assessed by people with no tax experience in this particular area and they are relying on guidance produced by HMRC which is heavily weighed to their advantage and not to the advantage of the sub-contractors.

For some of our clients we have found the public sector are deducting as much as PAYE at 20% and Employees National Insurance at 12% as well as also accounting for Employers National Insurance at 13.8%.

You can imagine the additional administration this now brings onto both parties, not to mention the complexities of adding VAT into the equation, which is magnified for those on the flat rate scheme and as the subcontractor, you can disagree how you are being assessed so whilst there appears to be a workaround to get the tax back, the reclaimable National Insurance remains something of a challenge.

Rumour has it that this scheme will be brought into the private sector, this will mean that most businesses will have to review the status of their engagement with all limited companies and sub-contractors it pays. You will also need to bear in mind that the fines for getting it wrong will then be on the payer and not the payee and this in turn will mean that more people are assessed as employed, as businesses will want to avoid the fines, which in turn helps the government increase its tax take.

My advice is to watch out for any announcements in the Budget on 22nd November 2017 and I would recommend you plan ahead and think about what impact this could have on you and your business.

If you have any questions please get in touch with me at