What’s in store for Umbrella contractors after April 2016?

Change is on the horizon for Umbrella contractors

Whilst the 2015 draft Finance Bill and Autumn Statement indicated less change is immediately on the cards for Limited Company contractors compared to their Umbrella contractor colleagues, there are still certain aspects planned for 2016 that all contractors need to be aware of.

 

What are these changes and how will they affect you?

IR35

Whilst no major changes were presented in the Autumn Statement, it’s likely that further announcements to IR35 will be made, post April. It was, however, announced that if you’re truly operating outside of IR35, then you are still able to claim for travel and subsistence (T&S), which is a major bonus for contractors that rely heavily on their T&S claims to increase their overall tax relief (after considering the 24 month rule).

 

Supervision, direction or control (SDC)

SDC will not apply to Limited Company contractors, if their contract is not caught inside IR35. So as a Limited Company contractor, as long as you ensure your contracts have undergone an IR35 risk assessment, you can rest easy knowing that SDC will not apply to you. With Intouch, you can have your contracts assessed as part of your all inclusive monthly service.

 

If your accountant doesn’t offer unlimited, free contract risk assessments, then it’s time to switch. With HMRC likely to once again sharpen their focus on IR35, it’s wise to be certain about the status of your contract.

 

The new SDC ‘test’ and the effects on Umbrella workers

April 6 will mark a significant change for Umbrella workers, as they will no longer be able to claim tax relief for their T&S expenses, if subject to SDC. It will be up to the Umbrella worker’s enlisted Umbrella service provider and end client to determine their SDC status, meaning that the Umbrella worker will not see a penny of their expenses until their status has been decided.

 

If you do pass the SDC test, you’ll then only be able to claim tax relief on your expenses via a Self Assessment Tax Return. You will have to pay your tax through PAYE throughout the year, then claim it back at the end of the tax year.

 

Whilst the finer details of SDC are yet to be announced, it’s clear that Umbrella workers are under the spotlight (with some industries more so than others), so make sure you keep an eye out for any further announcements that are to be made surrounding SDC.

 

Are you an Umbrella worker worried by SDC?

HMRC have provided some contractor scenarios to give you an indication on how certain careers may be affected. Whilst these scenarios can give you a good understanding of SDC, you should discuss it further with your Umbrella company to understand how they will support you during this time of change.

 

The Salary Sacrifice Test

If you’re an Umbrella worker that currently receives expense claims as part of your weekly / monthly payroll, then you’re going to notice a major difference come April 6. HMRC now view any form of expense payments within your salary as a salary sacrifice payment and are putting a stop to it.

 

This means many Umbrella companies will change their approach to how expense claims are paid to their contractors and, as explained previously, Umbrella workers can only claim expenses once a year through the use of a Self Assessment Tax Return.

 

What a load of kerfuffle for serious contractors still using an Umbrella company!

If you’re a serious contractor that relies on the tax relief from your expenses and you see contracting as a long term option, it make sense to check and be sure that working under an Umbrella is still right for you.

It’s clear that Limited Company contractors have mostly been left untouched (for the foreseeable future) to get on with what they do best, so why not join them and continue to enjoy the benefits from contracting that you rely on the most?

Join the contracting revolution with an accountancy that champions Britain’s contractors! Things are changing, don’t be left behind…

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Understanding the Self-Assessment Tax Return

Understanding the Self-Assessment Tax Return

We don’t like to be a scrooge here at Intouch, but after the Christmas festivities have ended it’ll be time for you to submit your Self-Assessment Tax Return (SATR). After all the Christmas chocolates have gone and the New Year celebrations seem like a distant memory, you will need to take stock from the past tax year and pay what is due to HMRC.

 

It’s a good idea to get on with your SATR as soon as possible so that it’s one less thing to worry about, especially over the festive period. If you are an Intouch client your Personal Accountant will have already been in touch to guide you through this process and make you aware of what needs to be submitted.

 

But if you’re not yet a client of ours and need to understand what the assessment is and if you need to fill one out, read on…

 

What is the Self-Assessment Tax Return?

It’s HMRC’s way of accounting for the incomes that may not all be taxed through permanent employment. Paper self-assessments must have been received by HMRC by the 31st of October and online submissions must be made by January 31st.

 

The assessment itself is a series of questions which all must be filled out. If you’re struggling with the answers, or need advice on claiming for your business expenses, then enlisting the services of a trusted accountant will be one of the best moves you can make.

 

If you have received only PAYE income since April 6th of this year, you may not have to complete an assessment. Exemptions may include if you have received any Child Benefit in your household and one receives an income in excess of £50,000, or if your income has exceeded £100,000 whilst in PAYE.

 

Who has to fill one out?

If you have received non PAYE income then you may need to fill out a Self-Assessment Tax Return. This includes (but is not limited to) the following types of people:

  •  self employed
  • if you are a company director
  • if you have accommodation or land that you receive payment for from tenants (unless covered by the rent-a-room scheme threshold of £4,250)
  • if you receive other income which is not taxed before you receive it
  • if you are subject to paying more tax as a result of Child Benefits and a member of your household is receiving more than £50,000 in income
  • if you are a pensioner who receives a higher amount than your tax-free personal allowances

 

If you’re unsure whether you need to complete a return, take a look at HMRC’s website.

 

What happens if you don’t return your self-assessment or tax due to HMRC?

If you miss the submission deadline for your return and / or tax payment, HMRC will issue you with a fine. The fines range from £100 for the first three months after missing the submission deadline and interest if the tax payment is late, with penalties enforced if more than 30 days late.

 

HMRC do allow you to pay your tax bill throughout the year with the use of their budget payment plan. Your Personal Accountant will be able to advise you on the best way to ensure you retain the correct amount of tax and when it’s due to HMRC.

 

What happens if you make a mistake on your SATR?

Many people make mistakes on their SATR, but it’s worth remembering that HMRC will not accept it if you’ve included incorrect information. If you do make a mistake you’ll have twelve months to correct it (which is called an amendment). However, if HMRC find an error in which they have had to prompt you, there could be a minimum 15% penalty charge on the total tax owed for each mistake that HMRC classes as a careless error. So make sure that you check it, check it again – then check it once more before you submit it!

 

How can Intouch Accounting help?

We ask our clients to submit their assessment details to us by November 30th, so there’s still time to join Intouch and have your self assessment submitted for this year. Please be aware that if you do join us now, there will be a charge for your SATR to be completed, as you have not been a client for the past tax year.

 

Alternatively if you’ve tried to go it alone and seen first hand the amount of time (and potential stress) it can cause, it might be time to look into appointing a contractor accountant.

 

At Intouch we include a personal self assessment tax return as part of our all inclusive monthly fee of £98+VAT. But that’s not all, take a look at our full service inclusions to see just how much we include in our monthly charge with no nasty hidden charges. Ready to join us? Great! Give our team a call on 01202 375 562 to talk through the joining process.

 

Missed our twitter chat with IPSE on the Self-Assessment Tax Return? Catch the full Q&As here.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.