Contractors’ expenses row could put PSCs out of business
Proposals to change the way contractors can claim expenses could have a wide reaching impact on the way that Personal Service Companies operate, with many expressing concern that they might be forced out of business if the proposals go ahead. The removal of tax relief on contractors who are under supervision, direction or control of a client could be devastating to umbrella company owners who wouldn’t be able to continue operating as they are should the changes be introduced in April as planned.
The Association of Independent Professionals and the Self Employed believes that many will be forced to stop trading, with an estimated 45,000 contractors potentially being affected according to their calculations. IPSE polled its members in order to gather data which demonstrates the difficulties that such a course of action will impose on those who will be subject to the new rules. With more than three quarters of their members concerned that the ban on travel expenses will render them unable to accept contracts that aren’t within a certain distance of their homes, leaving them financially disadvantaged if they were to take them on.
With many contractors operating as limited companies at the insistence of their clients, it puts independent professionals at a disadvantage compared to their larger competitors. Many are concerned that they will be unable to continue trading profitably and believe that they could have to old their businesses if the regulations are changed.
One of the solutions that independent professionals will have to consider is an increase in their rates to take into account the lack of tax relief, which could make it even harder for businesses to hire contractors. This could mean that companies are unable to make the most of the expertise available if they cannot access the flexible workforce, and this could have an impact on the wider economy and highlight the issues raised by the skills shortage even further.
If you want to know more, our contractors’ guide to expenses has plenty of information for anyone considering contracting, and our guide to limited companies will provide a thorough explanation of how structuring your business could help with tax planning. For more general information on contracting finances, our contractor tax information is ideal for giving you an overview of your potential position.
For more specific advice on your finances and the best way to ensure that you are maximising your income and freeing up your time to focus on your work, our accountants are always on hand to offer the benefit of their expertise, so call today on 01442 275789 or email firstname.lastname@example.org.