Contractors have been in the spotlight for some time now. While the current arrangements appear to be working well for contractors and the hiring companies (and, indeed, the general economy), there are other parties who are keen to meddle with things.
In the recent Budget it was announced that the new IR35 rules will be coming into the private sector from April 2020 – following their “success” in the public sector. These changes have already caused considerable disruption to contractors, their Accountants, recruitment agencies and hiring companies – with each party spending valuable time and resources dealing with the changes and uncertainties surrounding them.
Where does a firm of liquidators fit into all this?
When the IR35 changes came into the public sector, we helped a lot of contractors to close down their (solvent) companies with a Members’ Voluntary Liquidation. They were shutting their companies because they felt it was no longer worth them working for the public sector, and many were going to work overseas.
When the IR35 changes come into effect in the private sector in 2020, there are certain to be some contractors who will no longer need their limited company, as they will be deemed to be inside IR35. However, there is likely to be more consideration into the matter from the hiring companies, rather than the ‘one-size-fits-all’ adopted by some in the public sector – due to the benefits of the current situation.
Another thorny matter to consider
Having been deemed to be inside IR35, some experts are concerned that HMRC will want to tax anyone found to be inside IR35 on a retrospective basis. The thinking being that if they are deemed inside IR35 now, then they have always been inside – so they should be taxed accordingly.
Whilst HMRC have said that a probe into a Personal Services Company’s history is not ‘automatic’…they have left the door open for it to happen.
One effect of the IR35 changes is likely to be an increase in the desire for an MVL to close down no-longer wanted limited companies.
However, the risk of HMRC applying retrospective tax demands (which, we think would be appalling!), is a real concern for contractors. Some will be able to pay any additional tax revenues which are required to be paid. However, there will be others who won’t have the money readily available. They might have to consider a Creditors’ Voluntary Liquidation or a bridging loan to be able to deal with their predicament effectively.
The future is certainly uncertain for contractors. So it is up to us, as professional advisors, to support them and help them choose the best option available to them.