A couple of points related to freelancers or contractors jump out of the 2012 Budget.
Firstly, IR35 has, and remains, a big issue for contractors since its introduction in April 2000. It was hoped the new Government remove or reform IR35 this has not happened.
In the 2011 budget, the Government promised improvements which included a dedicated helpline and promotion of more effective engagement through an IR35 forum to monitor HMRC’s new approach. This forum has sought to narrow down the types of companies targeted for IR35 investigations.
The budget announced that it would “introduce a package of measures to tackle avoidance through the use of personal service companies and to make the IR35 legislation easier to understand for those genuinely in business. This will include: strenghtening up specialist compliance teams to tackle avoidance of employment income; simplifying the way IR35 is administered.”
We will let you know what this means as soon as further information is available. We think it may relate to implementing ideas that have come out of the IR35 forum.
Secondly, limited companies used by high ranking public sector individuals have been making the headlines recently and the Government has been quick to address this public criticism in the budget.
From 2013 any organisation that engages “office holders” and “controlling persons who are integral to the running of an organisation will be required to deduct PAYE and NIC’s from payments made for the services to the individuals.”
This should not affect regular freelancers or contractors, it should only affect office holders, i.e. if you get taken on in the clients organisation as a director or take a very similar role in that organisation. It is not expected that many people will be affected , but the Government is consulting on this new rule and how it will work. It is expected to be effective from the 6th April 2013.