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Five reasons why HMRC’s IR35 report has been criticised

An HMRC report on how IR35 reforms have impacted contractors has attracted criticism.

Read on to find out what the report said about IR35 and why it’s been accused of being ‘wide of the mark’.

HMRC report – what were the key findings?

Published in December, the HMRC report was based on a telephone survey of 353 businesses with 39 follow-up interviews.

Here are some of the key findings:

  • 130,000 workers are likely to have been affected by off-payroll reforms in April 2021
  • IR35 reform generated an additional £1.8 billion in tax revenue between October 2019 and March 2022
  • businesses employing contractors incurred an overall one-off cost of between £90 million and £230 million to implement the reforms
  • they spent a further £150 million to £370 million between April 2021 and April 2022
  • the number of workers affected by IR35 reform makes up 2.5 per cent of the total self-employed workforce

What happened to contractors affected by IR35 reform?

According to HMRC estimates, the majority of contractors impacted by off-payroll working reform have become an employee of a business that isn’t their own freelance company.

It suggests that approximately three per cent have continued to work for their own freelance company having been deemed ‘employed for tax purposes’ by the business they work for.

Of those who have become an employee of another organisation:

  • 65 per cent have moved to organisations which aren’t agencies or umbrella companies (which could include becoming an employee of a client)
  • 20 per cent have moved to an umbrella company
  • 15 per cent have moved to an agency

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

Do businesses still work with contractors post-IR35 reform?

HMRC’s research suggests that 41 per cent of organisations surveyed now work with fewer off-payroll contractors than they did in March 2020.

Meanwhile, 35 per cent said they hired the same number of off-payroll workers and 23 per cent said they’ve taken on more since IR35 reform.

The survey also found that 47 per cent of businesses worked with the same number of off-payroll contractors in September 2021 than in March 2020.

Five reasons why the HMRC report has been criticised

A number of off-payroll working experts and commentators have criticised the government’s report, according to publications like Contractor UK and The Register.

One commentator said the report was ‘wide of the mark’, while another said the findings should be taken with ‘a pinch of salt’.

Here are five reasons why it’s attracted a negative response:

1 . Could contractors be paying unnecessary taxes?

Many of the 130,000 workers who have moved to payroll since the reforms may have incorrectly been categorised as inside IR35, meaning they are now paying tax they shouldn’t be.

Matt Fryer, Managing Director of Brookson, said that the HMRC research should have included findings on incorrect determinations or status determination statements.

“HMRC seems keen to highlight that this represents just 2.5 per cent of the total self-employed workforce, and less than one per cent of the total workforce. Is this an indication that the government is content with the unfairness of this outcome?,” he said.

2 . Timing of research doesn’t paint ‘accurate picture’

By focusing on the period between March 2020 and September 2021, the research failed to give an accurate indication of the before and after scenario, according to Dave Chaplin, CEO of IR35 Shield.

This is because most businesses had already changed their working practices as the delay to off-payroll working reforms was announced just three weeks ahead of the original deadline in April 2020.

“Choosing March 2020 as the baseline is somewhat of a statistical howler and means the report paints a less disruptive picture than what occurred in reality,” Chaplin said.

3 . Underestimating the upheaval of IR35 reform

The HMRC report fails to tell the story of the impact of changing off-payroll rules in 2021, according to Seb Maley, Chief Executive of Qdos:

“Read this report and you’d think that the off-payroll rules have been plain sailing.

“We’re…told that half of businesses have found it ‘easy’ to comply with the off-payroll rules, and that around eight in ten firms assess IR35 status on a case-by-case basis.

“These statistics paint a nice picture, but I would take them with a pinch of salt. True, more businesses are getting to grips with these rules, but it’s been a difficult journey.”

4 . HMRC should have spoken to contractors and accountants

A former HMRC employee and now Co-Founder of Bauer & Cottrell, Kate Cottrell said the findings were “questionable” due to a lack of perspectives.

She commented: “To make this research have any value, you cannot limit it to asking just one party that has been affected by IR35 reform, even if you are only seeking short-term effects.

“For starters ask contractors how easy it was for them; ask all the accountants how many contractors they have lost and ask all the umbrellas how much new business they have gained.

“Ask the agencies how their client and contractor bases have changed; ask all the trade bodies, insurance providers and accountancy institutes how IR35 reform has been for them.”

5 . A pool of survey respondents that was too small

Cottrell went on to criticise the number of respondents to HMRC’s survey.

She said there should have been evidence from “tens of thousands of real-life experiences” instead of 353 calls and 39 follow-up interviews.

“It really is time for some balance, to seriously establish the short-term effects and of course the longer-term ones right up to the present day,” Cottrell commented.

“A key question is how much HMRC has spent on it all. Noticeably absent from this report, I suspect it will be an astonishing amount,” she added.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

HMRC responds to IR35 criticism

Responding to the negative comments about its study, an HMRC spokesperson said: “This reform has succeeded in improving compliance with the off-payroll rules, with more people who work like employees paying tax like employees, levelling the playing field.

“It is nonsense to assert that most businesses had changed their workforces by March 2020. Our analysis shows only 20,000 of the 130,000 workers identified who changed the way they work due to the 2021 reform had done so by March 2020.”

By Conor Shilling

Source: Simply Business

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Mortgages for the self-employed

Securing a mortgage may be more of a challenge if you’re self-employed (e.g. running your own business, or freelance).

Self-employed income is often less predictable and may also be less secure than a salary, so mortgage lenders need more reassurance that you can afford your monthly repayments in the long term.

You may therefore need to prepare more carefully if you’re self-employed, so that your mortgage application isn’t rejected.

Bear in mind that every rejected application can harm your credit score and make the next one more difficult, so give it your best shot the first time.

The self employed mortgage – busting the myths

You may have heard the phrase ‘self-employed mortgage’, but the truth is there is no special type of mortgage deal for self-employed people.

In principle you have the same choice of mortgages as a salaried applicant, although depending on your personal circumstances you may be offered a more limited range of deals, and may also face more stringent checks.

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

Tips on mortgages for the self employed

Here are some guidelines for applying for a mortgage if you are self-employed, and how to maximise your chances of securing a good deal.

Can your spouse take the lead on the mortgage?
It might sound obvious, but if your spouse is salaried rather than self-employed, it can make more sense for them to be the first name on the mortgage, as their application may be more likely to be approved.

Even if their income isn’t quite as much as yours overall, the fact that it’s regular and predictable may count in their favour. Ask your mortgage broker about this option.

Show at least two years of accounts
In most cases you’ll need to provide at least two years of recent accounts – the most recent can be no more than 18 months old.

Hire an accountant to ensure the accounts meet the required standards, and ask him or her to explain the accounts to you in detail so you can speak confidently about them if questioned.

Some lenders ask to see an SA302 form (a confirmation from HMRC of the income you’ve reported to them) either instead of or in addition to your accounts.

These can take a few weeks to arrive, so request them in good time. You may also be asked to show some recent tax returns.

Increase your income if you can
When running a business, usually it’s good practice to retain as much profit as possible within it.

However, you may want to make an exception when trying to secure a mortgage.

Paying yourself a higher dividend of the profits can boost your application, and should also enhance your savings so you can afford a larger deposit.

Once you have your new home, you can readjust your income if you wish, so long as you can still afford the repayments and other outgoings.

Postpone major business changes
Lenders look for stability, so it may hinder your chances if you’ve only recently changed the structure or type of your business (e.g. from a sole trader or partnership to a limited company).

If you don’t want to delay that change, then give the new business structure time to bed down so that the lender can have confidence in it.

Make sure your lender is aware of the type of business structure you have, so they fully understand your level of income and how you receive it.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

Be aware of the deposit bands
This tip is useful for all mortgage applications, but it can make an even bigger difference when you’re self-employed.

A larger deposit always means lower repayments, but there are also bands above which rates become even cheaper (typically 10 per cent, 25 per cent and 40 per cent deposit).

If you’re close to one of these bands, see if you can raise just a little bit more money to get past it – it’s usually worth the effort.

Remember that lenders often have different criteria
Why would one lender say ‘No way!’ and another say, ‘No problem!’? Because they may consider your earnings in a different way and take different income into account.

For instance, Lender A might focus on salary and dividends, while Lender B may base their decision on your operating profit and retained profits.

So if you get turned down by one, don’t despair – another lender may say yes without any changes to your income.

It’s good to consider this before you apply, to avoid the knock-back of a rejected application, so ask your mortgage broker to find the lender most favourable to your position.

Use a specialist self employed mortgage broker
Find a mortgage broker who has a lot of experience in finding mortgages for self-employed people.

A specialist can anticipate problems in advance and also source the most likely lenders for you from the whole of the market.

This reduces the risk of having your application declined. Although one declined application is unlikely to harm your credit score by much, a series of them might.

Seeing an adviser maximises your chances of being approved first time.

By Nick Green

Source: Unbiased

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Taking on the challenge of a self employed mortgage

Self-employed people still face an uphill struggle in mortgage applications, but help is at hand. Though some lenders have tightened their criteria, others are working with mortgage brokers to encourage buyers with complex incomes. Article by Nick Green.

If you run your own business, work as a contractor or earn through freelancing, then you’re disproportionately more like to have your mortgage application refused. Despite an extensive raft of measures from the government to help first-time buyers, from the stamp duty holiday to 95% mortgages, self-employed people are still relatively lacking in support. However, some lenders such as Bluestone are now taking a more proactive stance to encourage the self-employed, and many mortgage brokers remain very happy to take these customers on.

It has always been more difficult to get a mortgage when self-employed. Lenders prefer the reassurance, predictability and ease of calculation that comes from a regular income, rather than the more erratic, complex incomes (generally) associated with self-employment. The pandemic and lockdown have only amplified these differences, especially as many self-employed people and business owners have been less well-supported by grants and furlough schemes. As a result many lenders further tightened their lending criteria, at least initially. But there are a signs of a shift in the other direction.

A poll in April by Mortgage Solutions found that six out of ten mortgage brokers believe that product availability is narrowing for self-employed borrowers, while criteria are growing more stringent. However, nearly a third thought the opposite, suggesting that opportunities are still out there for those who persist. There are also indications that some lenders are being forced to relax their criteria, to avoid losing their customer base.

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

Why the self-employed get a ‘raw deal’ on mortgages

What’s not in dispute is that the search for a mortgage has become a lot harder for the self-employed. Research by Mortgage Broker Tools (a platform used by mortgage advisers) suggests that almost a third of self-employed mortgages are now effectively ‘unaffordable’, and that the maximum amount such customers can borrow has dropped by 3% since August.

The research also found that over a third of self-employed applicants had suffered at least one mortgage rejection. A comparable study by mortgage broker Haysto found this figure to be smaller, at one in six, but still significant. Paul Coss, co-founder of Haysto, feels that the self-employed get a raw deal, given that often they can boast higher incomes in real terms than people on salaries can. He says, ‘Mortgage lenders tend to prefer people in full-time employment, because it’s easy and simple to understand their income. Being self-employed, your income isn’t as straightforward, [but] people shouldn’t be penalised for that.’ His view is that most mortgage lenders just aren’t willing to handle the extra effort of dealing with complex incomes.

Kaan Emin, a broker at Apply Mortgages, warns that self-employed people who use the government support scheme SEISS (the equivalent of furloughing themselves) may inadvertently harm their mortgage prospects. He says, ‘Most self-employed people of which have taken help from the Government during the pandemic are being disadvantaged by lenders. [They] have to return off furlough and evidence three months of business bank statements to evidence the same level of income they earned prior to the pandemic.’ He suggests that self-employed people should only use schemes like SEISS if absolutely necessary.

But David Baird, a mortgage adviser with Aventur Wealth, offers a more optimistic viewpoint. Although he concedes that Covid has had ‘a huge impact on self-employed mortgages’ and led to increased discrepancy, he says, ‘Personally I have not seen a decline in acceptance rates. Instead it has caused an increase in time taken on my part in researching the right lender for the right applicant.’ In other words, self-employed buyers still have a fighting chance if they can find a diligent mortgage broker who will search the whole of the market for them.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

New opportunities for self-employed homebuyers

Fortunately, some lenders do recognise the difficulties created by Covid, and are adjusting their requirements to reflect this. Leading the way is Bluestone Mortgages, which has updated its credit policy for self-employed applicants. Those who have experienced a drop of 10% or more in business income, but have since restored their earnings to their former levels, can use their 2019/20 as the yardstick both for affordability and maximum loan size. So long as borrowers can provide three months’ evidence of the restored income, it will be treated as the equivalent of a full year for mortgage purposes.

‘We are acutely aware of the hardships that the self-employed community has faced during the COVID-19 pandemic,’ says Reece Beddall of Bluestone, ‘and we remain committed to providing these borrowers with a lending solution that will better meet their needs.’

Shared ownership remains a possible route for those whose home ownership ambitions have taken a knock. This is most commonly offered by housing associations, but private companies are also creating opportunities. One of these is Wayhome, whose CEO Nigel Purves observed that the stamp duty holiday had still left a lot of people behind. He says, ‘Even with the Stamp Duty extension for an extra three months spurring on hopeful home buyers, there are many who find themselves overlooked and ignored due to their household income not meeting a mortgage lender’s criteria. This is despite them already having a deposit saved and being able to afford the equivalent of mortgage repayments in rent each month. More needs to be done to level the playing field and provide people with alternative routes into home ownership.’

Guarantor mortgages are another potential way to persuade a lender to take you on, though it requires having parents or other relatives willing to share the risk. Another, more radical option for self-employed first-time buyers may be to try and ‘weaponise’ the very thing that is keeping them off the housing ladder: namely, the over-inflated housing market. How? Such a move would likewise need the help of willing parents, who fully own their home mortgage-free and are willing to release equity from it to raise money for a deposit. The parents use equity release to take a chunk of money from their own home’s value, which becomes all or part of the deposit for their offspring’s home. So effectively it is an ‘equity transfer’.

Bob Hunt, chief executive of Paradigm Mortgage Services, says he is now seeing ‘a much closer alignment between the equity release sector and that of the first-time buyer.’ At one level the strategy makes a lot of sense – if the problem is down to rising house prices, then rising house prices can be part of the solution. The downside of course is that a lot of value is eroded during the equity release process, so by gifting a child a deposit made of released equity, parents would be reducing that child’s eventual inheritance by a much greater amount. Still, some families may consider it a price worth paying for the reward of home ownership.

Being self-employed does have many advantages, but ease of obtaining a mortgage isn’t one of them. Nevertheless, in the post-Covid market new opportunities are gradually emerging, and mortgage brokers are ready to help contractors, freelancers and business owners take advantage of them, while advising on the best options to choose.

By Nick Green

Source: Unbiased

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Mortgages difficult for self-employed say advisors

A new survey of mortgage advisors has found that the majority of them think that lenders are making it more difficult for self-employed people to get a mortgage, despite growing numbers opting for self-employment.

United Trust Bank carried out this survey and nine of every 10 advisors that responded to it said that the eligibility criteria for people who are self-employed has been made much stricter by mortgage lenders. In total, 91% of the advisors who took part in the survey told the bank that it is now harder than ever for the self-employed to secure a loan.

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

This survey was part of a new report published by the bank that has been titled ‘Growing opportunities for brokers in the specialist mortgage market.’ The premise is that lenders outside of the big-name ones might offer a way for those with complicated financial and employment situations to get onto the property ladder.

According to Mortgage Strategy, this report goes on to argue that such people:

“Are a group which will continue to grow and that having lenders sufficiently skilled-up and with an appetite to cater for these customers is vital.”

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

This is supported by the available evidence, which shows that self-employed numbers in the UK had reached 4.2 million by March of this year. These figures are provided by the Office for National Statistics.

Many mortgage advisors who have CeMAP training are already aware of the need to look to specialist lenders to meet the mortgage needs of self-employed clients and others with complex circumstances.

Source: Beacon Financial Training

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The hard truth about IR35 reform’s repeal and advice for contractors

The dust hasn’t even yet settled on chancellor Kwasi Kwarteng’s announcement that IR35 reform of 2017 and 2021 is to be repealed, but the scaremongering has already begun.

There’s also the speculators, the cynics, and the so-called ‘experts’ – those with vested interests, and those bitter from being left out of the conversation. And they are on top of the odd article unhelpfully and boldly claiming to contain no less than “everything” IT contractors need to know about the reform’s repeal. If only it was that simple, writes former HM Treasury secondee and ex-tax inspector Kate Cottrell, the co-founder of IR35 specialists Bauer & Cottrell.

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

As of October 2022; what are we seeing?

The initial euphoria, expressed by many following the chancellor’s announcement that the Off-Payroll Working (OPW) rules are to be repealed from April 6th 2023 has died down.  There are three main reasons for this:

  1. Is it really going to happen? Nothing has changed yet and we have a Budget coming up in November, preceded by a government already doing a U-turn on its 45p tax rate plan. The possibility of further U-turns therefore seems significant. Fingers crossed that this promised repeal of the OPW rules goes ahead. But it’s not certain.
  2. End-clients (both public and private sectors), agencies, umbrella companies, accountants and IR35/OPW advisers are all taking stock and wondering how this could affect their business. And yes, that goes for me too!
  3. Contractors are realising that unless they have always been outside IR35 and working for ‘small’ companies (not affected by the OPW rules), that their own circumstances are complicated.  Notably where the contractor is:
  • currently with an umbrella, or
  • holding an SDS where the client has stated ‘inside IR35’, or;
  • regularly jumping between their PSC and an umbrella company depending on the IR35/OPW assessment.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

Beware scaremongering

At this stage (Q4 2022), nobody knows how the repeal of the OPW rules will work. That’s the unpopular, hard truth. So — many commentators are reaching for their crystal balls, with some suggesting that there will be new rules for contractors added onto the IR35 rules of old (2000), such as requiring contractors to complete Status Determination Statements. There’s even the odd whisper that end-clients will continue to determine IR35 status; that blanket bans on using PSCs will continue indefinitely, and that HMRC will declare some sort of ‘amnesty’ on prior SDSs with ‘inside’ results. As interesting as they are, these really are only opinions at this stage and should be taken as nothing more.

It is impossible to make concrete plans, yet

Until we see the detail of the IR35 reform repeal in black and white via the Finance Act, it is only possible to try to plan, and consider risks based upon scenarios that may be realistic. That’s where we can have some sympathy for the genuine, qualified, advisers in this space trying to look into the future.

Fortunately, HMRC has promised further guidance for contractors unfamiliar with the IR35 regime. But it is likely (in my view!) that this guidance will be in the form of a referral to the guidance already in place. My expectation is for a straightforward repeal of the OPW rules, with no add-ons, changes, and nothing new that has not already been in place since April 2000.

What can you do in the next six months?

Every part of the contracting chain needs to use this time to analyse the effects on their own businesses and it is vital that all get up to speed with IR35 version one (2000). 

We have seen many “IR35 experts” born since the advent of the OPW rules, and I’d caution contractors to be very careful as a result. These so-called ‘experts’ are, perversely, actually very well-positioned if it pans out that the only thing that changes post-April 6th 2023 is who makes the IR35 decision, and who is liable for getting that decision wrong. For our part, our advisory will continue to work with the same case law precedent, and keep a keen eye on the cases going through the tribunals and courts.

What is the best advice for contractors over the next six months?

  • Keep watching the contractor press for developments (the contractor ‘press’ that doesn’t just stick a press release up!).
  • Decide what you want to do — if you could.
  • Collect and keep all evidence including SDS outcomes, online IR35 status tool outputs, end-client correspondence, contract review results, and working practices changes/opinions.
  • Find out about your personal situation now, to see what the options and (above all else) the risks are, and if a change in your status is feasible.
  • Speak to your client and find out what their position may be come April 6th 2023, especially if you are contracting with an organisation that has banned PSCs.
  • Take advice from only those that, as impartially as possible, understand all the rules (from 2000 onwards), and ideally those with hands-on experience of successfully defending IR35 HMRC investigations.

Final thought

In short, make good use of the next six months so you are ready for April 6th 2023!

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What’s The Future For UK Mortgage Rates?

The Bank of England raised interest rates in September from 1.75% to 2.25%. The 0.5 percentage point increase marks the seventh rise since December 2021 when Bank rate stood at just 0.1%. It also puts Bank rate at its highest level for 14 years.

Concerns are mounting around further, and steeper, interest rate rises in the face of sterling volatility and increasing market uncertainty. Some mortgage lenders, including Halifax, Virgin Money and Skipton Building Society are pulling mortgage deals for new applicants.

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

Interest rates, mortgages…
So what do climbing interest rates mean for mortgages? The two million homeowners on variable rate deals, such as base rate trackers, will see an almost immediate rise in their monthly repayments following the recent Bank rate rise to 2.25%. As an example, a tracker rate rising from 3.5% to 4% will cost almost an extra £60 a month on a £200,000 loan.

Remortgagers and first-time buyers will also be faced with higher mortgage costs when they come to source a deal, with the cost of new fixed rates having already factored the latest rise into the price.

… house prices and Stamp Duty
As well as more expensive mortgages, those looking to buy or move home are grappling with relentlessly rising property prices. The average cost of a property coming to the market increased by 0.7% in September (£2,587) to £367,760, according to Rightmove. Annually, average asking prices are 8.7% higher in September than a year ago.

However, Stamp Duty cuts announced in Friday’s Mini Budget – which raised the nil-rate band on the purchase of a property from £125,000 to £250,000 – means that with a third (33%) of all homes listed on Rightmove are now exempt from the tax.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

Fixed rate mortgages
More and more homeowners are now opting for longer-term fixed mortgages in a bid for stability in the face of continued rising interest rates. But while, historically, borrowers would pay more to fix in for longer, the price gap is closing.

According to mortgage broker Trussle, the top interest rate on a no-fee 75% loan-to-value fixed rate mortgage is now 3.25% over two years, 3.35% over five years, or 3.99% over 10 years. Refer to our mortgage tables below for what deals are available today for your deposit level and circumstances.

Why are interest rates rising?
The Bank of England’s Monetary Policy Committee (MPC) uses interest hikes as a means of cooling the economy and taming rising inflation. The Consumer Prices Index (CPI) measure of inflation already stands at a heady 9.9% in the 12 months to August against a government target of 2%.

And with the pound falling dramatically on the international currency markets this week, there are fears that inflation could continue to balloon, prompting the Bank of England to hike rates to as high as 6% from their current 2.25% by next year.

The Bank’s MPC is scheduled to next meet on 3 November to decide on interest rates. However, depending on what happens in the markets and wider economy, there is a possibility that an ’emergency rate rise’ could happen sooner, although the Bank has suggested this is unlikely.

One of the main longer-term drivers behind rising inflation is the cost of energy. The government has intervened by replacing the energy price cap – which had been due to send energy prices soaring to over £3,500 a year from 1 October – with a cheaper Energy Price Guarantee.

This will limit the cost of typical-use household bills to £2,500 a year for two years, with an additional £400 automatic discount applied to electricity bills for every household between October 2022 and March 2023.

By Laura Howard

Source: Forbes

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Mini-Budget: IR35 will be repealed from April

The IR35 reform will be repealed from April 6, 2023, according to this morning’s mini-Budget.

Speaking to the House of Commons today (September 23), Chancellor Kwasi Kwarteng said from April, workers across the UK providing their services via an intermediary, such as a personal service company, will once again be responsible for determining their employment status and paying the appropriate amount of tax and NICs.

Kwarteng also used today’s mini-Budget to scrap the additional rate of income tax and cut its basic rate to 19 per cent in a series of tax cuts which amount to £45bn.

The 2017 and 2021 reforms to the off payroll working rules – also known as IR35 – were a tax law that required the end client, and not the contractors they hire, to decide if the working relationship resembles a self-employed engagement or employment.

Under existing rules, the fee-paying party (either the end client or recruitment agency) shoulderd the liability.

The aim of the reform was to stop the promotion and misselling of disguised remuneration schemes, however the legislation has received criticism.

Kwarteng has repealed these reforms as part of the first steps in taking complexity out of the tax system.

He said: “To achieve a simpler system, I will start by removing unnecessary costs for business. We can also simplify the IR35 rules and we will. In practice, reforms to off-payroll working have added unnecessary complexity and cost for many businesses.

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

“So as promised, by the prime minister, we will repeal the 2017 and 2021 reforms. Of course, we will continue to keep compliance closely under review.”

The changes will mean workers will once again be responsible for determining their employment status and paying the appropriate amount of tax and national insurance contributions.

This will free up time and money for businesses that engage contractors which the chancellor said could be put towards other priorities.

The reform also minimises the risk that genuinely self-employed workers are impacted by the underlying off-payroll rules.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

IR35 reforms
In August, prime minister Liz Truss gave an interview where she indicated she would review the IR35 reforms.

The reforms were introduced in April 2021 to the private sector, and means that the responsibility for assessing whether a contractor is self-employed or employed is now with the end client, and not the contractor themselves.

The liability, and therefore financial risk, was also transferred to the fee-paying party.

The changes have been branded “a mess”, “unpopular” and “puzzling”.

The controversy surrounding the changes prompted the former chancellor, Sajid Javid, to pledge a review of IR35 as part of the Conservative party’s manifesto in the lead up to the general election.

By Sonia Rach

Source: FT Adviser

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Truss to announce stamp duty cut – report

UK housebuilders rallied on Wednesday following a report that Friday’s mini-budget could include a plan to cut stamp duty.

According to The Times, prime minister Liz Truss will announce the move in the mini-budget in an attempt to drive economic growth. It was understood the PM and chancellor Kwasi Kwarteng have been working on the plans for more than a month.

Truss believes that cutting stamp duty will encourage economic growth by allowing more people to move and enabling first-time buyers to get on the property ladder, The Times said.

It cited two Whitehall sources as saying that cuts to stamp duty were the “rabbit” in the mini-budget, which the government is billing as a “growth plan”.

Under the current system, no stamp duty is paid on the first £125,000 of any property purchase. Between £125,001 and £250,000 stamp duty is levied at 2%, £250,001 and £925,000 at 5%, £925,001 and £1.5m at 10% and anything above £1.5m at 12%. For first-time buyers the threshold at which stamp duty is paid is £300,000.

During the pandemic, then chancellor Rishi Sunak lifted the stamp duty threshold to £500,000.

At 0910 BST, Persimmon shares were up 5.4%, while Taylor Wimpey and Barratt were up 4% and Berkeley was 3.5% firmer. On the FTSE 250, Redrow was 5.6% higher, while Bellway and Crest Nicholson were up 3.6% and 3.4%, respectively.

Tom Bill, head of UK residential research at Knight Frank, said: “Nobody can accuse the new government of lacking an economic vision. If its low-tax approach extends to stamp duty, recent history tells us it will trigger higher levels of demand in the housing market at a time when mortgages are getting more expensive, which will support social mobility.

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

“Prices could move higher in the short term if supply initially struggles to keep up but more balanced conditions will return provided the cut is immediate and permanent.”

Neil Wilson, chief market analyst at Markets.com, referred to the potential stamp duty cut as “the old Tory trick of juicing the housing market in its heartlands to boost confidence (wealth effect) whilst doing not a lot for housing supply”.

“I’m not for concreting over the green belt at all, but there will be questions about the economic soundness of this policy, as there always is. However, with interest rates rising so quickly, an offset to the cost of buying a home would grease the wheels of the market -without higher rates could cause the housing market to seize up.”

He added: “Clearly a stamp duty cut is good news for housebuilders who can expect higher selling prices as a result.”

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, argued that a stamp duty cut could do more harm than good.

“Buyers are unlikely to be unhappy at the prospect of a tax cut, but if the government chooses to cut Stamp Duty in an effort to stimulate the housing market, there’s a risk it could do more harm than good.

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“It’s easy to see why the government is concerned about the housing market. We’ve seen demand fall consistently since May, when rocketing bills, rising house prices and ever-increasing interest rates started to take a toll on buyer enthusiasm. There’s a risk that if rate rises accelerate, pressure on buyers could reach a tipping point, where demand dries up.

“We know from very recent experience that a Stamp Duty holiday can stimulate demand. However, the only reason these holidays work is because people feel they have a small window of opportunity to take advantage, otherwise they’ll miss out. The point at which they think they can just wait for the next one, they will start to become less effective.

“Even if it does stimulate demand, it overlooks the fact that the real brake on the property market is a severe shortage of supply. With an average of 36 properties on each agent’s books, we’re still close to an all-time low in the availability of property for sale. Driving demand without addressing supply would risk more buyers chasing a tiny number of properties, which would push prices up.

“By ramping up prices at a time of rising mortgage rates, the end result would be higher monthly mortgage costs, which would be increasingly unaffordable. And the Stamp Duty holiday wouldn’t help on this front. This in itself could be enough to put buyers off, and if it deters enough of them, it could end up having the opposite impact to the one that’s intended.”

By Michele Maatouk

Source: Sharecast

BoE
Marketing No Comments

Bank of England to suspend market operations for State funeral

The BoE said CHAPS will be closed on 19th September, in line with its normal bank holiday arrangements.

CHAPS handled around 174,000 payments each day, in the year to February 2021, with an average payment value of £2.1m. That works out at around £367bn each working day.

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CHAPS is used by banks and large corporations to settle high-value money market and foreign exchange transactions, by companies to pay taxes, and by solicitors and conveyancers to settle property transactions.

The Bank’s Real Time Gross Settlement (RTGS) service, which underpins large transfers between bank accounts, will also be closed.

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Back in 2014, RTGS collapsed for most of a day, putting thousands of housing market transactions on hold.

Last week the BoE said the sale of corporate bonds held by the Asset Purchase Facility will be delayed by a week, to 26 September, following its decision to delay its next interest rate decision by a week (to 22nd September).

Source: London Loves Business

mortgages
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Fall in UK house prices ‘should be taken with a pinch of salt’

A fall in house prices in July 2022 should be taken with a pinch of salt, a contractor mortgage brokerage today warns.

Freelancer Financials, which specialises in mortgages for contractors, sounded the cautionary note this morning, following the Halifax recording the first property price dip in 13 months.

The limited company-friendly lender found that average house prices fell between June and July by 0.1%, while the annual rate of price growth over the same period eased from 12.5% to 11.8%.

The first of its kind since June 2021, the 0.1% fall takes the average property price tag to £293,221, down £365 on the previous month’s record-high, Halifax said.

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‘Stimulated’
But it is probably unfair to compare today’s house prices with 2021’s — when the stamp duty holiday “stimulated the market,” according to Freelancer Financials’ John Yerou.

“Plus, there is usually a seasonal drop-off in the summer months of July and August,” continued Mr Yerou, the brokerage’s chief executive.

“This fall in prices is only fractional …[and] comparing 2022 with pre-pandemic levels, in 2019, demand is still up.”

Similarly, despite the fall of just 0.1% on a monthly basis, house prices remain more than £30,000 higher than this time last year, observed Halifax’s managing director Russell Galley.

‘Bigger houses, biggest price gains’
The lender signalled that contractors looking to move up the property ladder will probably benefit the least from the tiny price fall, because the gains in the values of larger homes are still strong.

Price gains for “bigger houses” even outpaced those for smaller homes in July, with the price of a detached property inflating by £60, 860 (+15.1%), versus £11,962 (+7.7%) for flats.

“Although this fall in house prices seems to indicate that the housing market is cooling off… [it[ should be taken with a pinch of salt,” cautioned Freelancer Financials’ Mr Yerou.

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‘Drivers of buoyancy remain’
“We shouldn’t read too much into any single month”, agreed Mr Galley of Halifax.

“Leading indicators of the housing market have recently shown a softening of activity, while rising borrowing costs are adding to the squeeze on household budgets against a backdrop of exceptionally high house price-to-income ratios.”

Galley added that some of the “drivers of the buoyant market” of late, such as extra funds saved during the coronavirus pandemic and changes to how people use their homes, remain.

However Halifax says the “extremely short supply” of homes for sale is serving to “underpin” property prices at a high level.

‘Negotiating power gradually shifting’
At Freelancer Financials, Mr Yerou shared his outlook with ContractorUK: “Several indicators point to activity in the market continuing to cool from the lofty heights of the last two years.

“It is likely that the impact of interest rate rises will gradually trickle through, but right now they’re not having a serious impact on the property market. Yes, demand has lightened a fraction and negotiating power is gradually shifting to buyers, but until the imbalance in affordable properties is addressed, house prices will remain stable.”

By Simon Moore

Source: Contractor UK