IR35 tax complications continue to hit freelancers and contractors and while the Government aims to mitigate this, its tools prove to be imperfect. Analysis of recent data from HMRC found discrepancies in the private contractor industry.
HMRC released data on its Check Employment Status for Tax (CEST) tool usage in late June, which was created to help people find out if they should be classed as employed or self-employed for IR35 tax purposes. The results of this data showed thousands of self-employed workers are still struggling with the changes introduced in April 2021.
The CEST data showed that while 499,974 were deemed outside IR35, and 308,176 were deemed inside, 210,100 users were categorized as “undetermined”.
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At the time, many experts argued this showed the tax changes were too complicated to manage, even for the Government itself.
On top of this, Matt Fryer, the Head of Legal Services at Brookson Legal, identified a worrying discrepancy.
Mr Fryer said: “There is a huge discrepancy between the CEST usage data and the number of private sector contractor jobs being advertised as outside of IR35.
“As demand for skilled labour begins to outstrip supply, hiring businesses that are unable to guarantee outside IR35 status for these contractors will struggle to recruit the talent they need for economic recovery.
“According to CEST data, 49-56 percent of all contractor roles clearly fall outside of IR35, with another 19-21 percent in a grey area that the tool is unable to determine.
“Market data from Jobfeed, however, indicates that only 26 percent of contractor roles are currently being advertised as outside IR35 (w/c June 7).
“This is a worker’s market, with REC reporting on rapid rises in hiring and intent to hire for temporary roles, coupled with a shortage of skilled talent.
“As the economy picks up, businesses that require skilled contractors will need to clearly demonstrate that they can provide roles outside of IR35 to beat the competition.
“The question is: why are more of these roles not being advertised already?
“One answer might be that many businesses do not have faith in the solutions that they put in place to meet the deadline.
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“This is where we will see hirers who have planned well begin to reap the rewards of their diligence.”
Struggling freelancers may be able to receive support through SEISS at the moment, as claims for the fifth and final set of grants can be made up until September 30, 2021.
To be eligible for these grants, claimants must be a self-employed individual or a member of a partnership.
They must also have traded throughout the 2019 to 2021 tax years.
Eligible claimants must also have submitted their 2019 to 2020 tax return on, or before, 2 March 2, 2021, have trading profits of no more than £50,000 and are at least equal to their non-trading income.
For the fifth grant, claimants will also need to provide details on their turnover figures so the Government can calculate how much money should be paid out.
Claims are made through the Government’s website.
Following this, the Government will pay grants within six working days, so long as claimants are eligible.
HMRC should only be contacted if payments do not arrive within 10 working days.
By CONNOR COOMBE-WHITLOCK
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