PSC contractors anticipate Budget 2016 announcement

A recent report has suggested that the 2016 Budget will mark the announcement of a complete overhaul of public sector contracting through Personal Service Companies. Set to cost around £400 million, the changes that have been predicted will make engagers liable for ensuring the status of staff who are ‘off payroll’, including dealing with their tax and IR35 position.

At present, it falls on the staff themselves to demonstrate compliance to their clients and it is ultimately their responsibility to ensure that they are able to do so. However, last week’s Sunday Times reported that it would now be the responsibility of the client to ascertain whether a worker is an employee or not, to which end further guidance is due to be issued in order to clarify their position.

The change has come about as a result of repeated requests for reform in the public sector which have so far been unsuccessful. According to the Times’s report, this has allowed around 20,000 PSCs to avoid an average of £3,500 in tax each. A government source is quoted as saying that, whilst there are some legitimate PSCs, they estimated that 90 per cent of those operating were failing to comply with the rules.

This view is completely at odds with the research conducted by the Treasury itself which released official statistics saying that they believed that 95 per cent of the UK’s PSCs were operating legitimately.

The government source is anonymous, and makes no mention of the form that the plans will actually take or how they will be implemented, but the accusations levelled in the report have sparked anger on the part of Julia Kermode of the Freelancer & Contractor Services Association.

She believes that the majority of contractors are operating legitimately, but given that they are still waiting for the overdue response from the government on the matter of IR35, she is hoping that the government will be more circumspect about any changes they make in the 2016 Budget.

Chris Bryce, of the Association of Independent Professionals and the Self Employed, has also expressed the organisation’s concern that changes made this year will cause confusion for contractors and additional costs for taxpayers.

If you want to learn more about the options for contractors, our guide to IR35 is invaluable and we have plenty of information on the advantages and disadvantages of a limited company. For an idea of how your finances cold look, our contractor calculator is a useful tool to work out how much you could be earning.

For advice, support and help from an expert, call our friendly team on 01442 275789 or email newbusiness@sjdaccountancy.com for more information.

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