Employees in the United Kingdom can be categorised as full-time, part-time, casual, freelance and contract workers, with the self-employed bracket now making up 15% of the entire working population. The number of self-employed workers jumped from 3.3 million in 2001 to 4.8 million in 2017, with a corresponding fall in the unemployment rate showing the overall boost in jobs growth from the rise in self-employment. However, the attractive market for freelancers and contractors has been hit with some uncertainty in recent times, thanks largely to the 2018 Autumn Budget’s announcement of IR35 tax reforms. Here’s what the new IR35 rules could mean for you and your business: What is IR35? IR35 is a piece of legislation originally introduced to the UK in 1999. Its purpose is to differentiate between those workers who operate as genuine contractors and those who work as ‘disguised’ employees to avoid paying tax. It came about to challenge contractors who were taking advantage of the tax efficiencies of working through a limited company, with the aim of defending both the Exchequer from lost taxes and protecting workers’ rights from unscrupulous employees. However, the IR35 has proven to be ambiguous for many, with some contractors taking advantage of loopholes and a lack of clarity. Hence, the new IR35 rules aim to tighten up the contractor market and ensure tax avoidance loopholes are closed. How does IR35 work? There are three principles that can help to determine employment status and whether a contractor falls inside or outside IR35: Control (the degree of control the client has over the work a contractor does and how and when they do it) Substitution (whether the worker needs to do the work themselves or if they could send a substitute in their place) Mutuality of obligation (whether the employer is obliged to offer work and the contractor is obliged to accept it). Additionally, the contract type, provision of equipment and whether a worker is “part and parcel” of a business can all help to determine whether someone falls inside or outside IR35. The change in IR35 rules shifts the responsibility to determine tax status away from the contractor and onto the business that takes them on. Until now, contractors have been able to self-determine their status, however as of April 2020, when the new rules come into effect for the private sector, companies will risk being fined if they don’t make the correct assessment. How will IR35 impact contract workers? It’s anticipated that many contract workers who have been enjoying the tax benefits of working outside IR35 will fall under the legislation when employers are tasked with determining their status. This will see more contractors having tax and National Insurance contributions deducted from their pay. However, if you operate as a legitimate small business and are determined to work outside of IR35, you will not be affected by the rule changes. How will IR35 impact employers? The major change for businesses is that they will now be responsible for determining the IR35 status of any contractor working for the company. The new rules will only apply to medium and large sized businesses, so contractors who work for small businesses can continue to set their own IR35 statuses. Those businesses that the IR35 rule changes do apply to will face paying back taxes and fines should they be found to be noncompliant. What should I do to prepare for IR35? Contractors may wish to speak to an accountant or personal finance expert to determine whether IR35 will impact them and if a move to permanent work may prove to be more beneficial after the rules come into effect. For many, contracting will remain appealing regardless of increased tax responsibilities, however it’s important to factor in any change in income that IR35 may bring about. Businesses are being warned not to make blanket assessments that cover all their contractors, as this can leave workers without a fair assessment and risk them paying unnecessary taxes without equivalent employment rights. Instead, businesses should consider IR35 status on a case-by-case basis or they may risk losing out on top talent. The HMRC has released a consultation document for businesses to prepare for the IR35 changes, recommending identifying and reviewing current contract workforce status and putting processes in place for taking on new workers. At Marks Sattin, we pride ourselves on keeping abreast of all industry legislation, updates and changes that affect our candidates and clients. Speak with us about how we can help you. References: https://www.bbc.co.uk/news/business-44887623 https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/articles/trendsinselfemploymentintheuk/2018-02-07 https://www.contractorcalculator.co.uk/what_is_ir35.aspx https://www.axa.co.uk/business-insurance/business-guardian-angel/how-ir35-changes-will-affect-freelancers-and-self-employed-contractors/ https://www.telegraph.co.uk/business/ir35-rules/new-contractor-tax/ https://www.telegraph.co.uk/business/ir35-rules/how-will-new-rules-impact-business/ HMRC consultation document
TeaserCommerce & Industry
Content TypeMarket Insight Reports
Part Qualified & Transactional The beginning of this year was busier than usual, with consistent job flow and healthy activity - junior professionals are less worried about moving roles with Brexit on the horizon. New budgets are set at the beginning of the year, and companies were certainly hiring. Newly Qualified 2019 got off to a subdued start, it’s often a challenging period where clients are busy with month/quarter/year end, and recruitment isn’t the priority. In addition to this, the political landscape made employers much more considered about their hiring strategy and we saw 17% less permanent roles being registered. In saying this, as the year has progressed, the volume of roles has increased and the market is buoyant. Our main challenge is that the market is in short supply of candidates. Reasons for this are that Q1 is a busy season for ACAs in practice so they do not have the time to interview, and also many permanent candidates are reluctant to move due to economic uncertainty. Qualified Interim The qualified and interim market enjoyed a successful 2018, with a record Q2 for the business. Albeit a slow start to 2019, the market gained some momentum after January. These peaks and troughs perhaps mirror the political uncertainty around how we are to leave the EU. Despite the turbulent environment, our data points towards a busy recruitment market where we are seeing increases in the number of permanent and interim roles being registered. Considering the UK’s high employment rate and the demand for high calibre individuals, there is an emphasis on engaging with passive candidates in new and innovative ways. INSIGHT: Will IR35 affect your business? Employees in the United Kingdom can be categorised as full-time, part-time, casual, freelance and contract workers, with the self-employed bracket now making up 15% of the entire working population. The number of self-employed workers jumped from 3.3 million in 2001 to 4.8 million in 2017, with a corresponding fall in the unemployment rate showing the overall boost in jobs growth from the rise in self-employment. Download the full Commerce & Industry 2019 Market Insight Report » View salaries and commentaries in other UK regions and Ireland »
TeaserCommerce & Industry
Fintech is constantly rewriting the rules on how companies operate, how businesses borrow money, and how customers pay for goods. It’s exciting to see how it’s changing the way we conduct transactions across the market, and it’s going from strength to strength. Since 2017, Fintech has been the leading sector for investment, with UK financial technology firms attracting a record £1.34 billion in venture capital funding in 2017 alone. With the fintech market constantly evolving, from blockchain to automation, let’s look at how it’s impacting commerce and people’s roles: Flexibility and Accessibility One of the key benefits of fintech is its flexibility and the ease with which it can be adapted to suit the evolving digital market. In today’s hyper-connected world, it offers accessibility; casual shoppers, business people, and even companies can access their money instantaneously on banking apps, and pay for services with the touch of a button. It’s a new way of doing business, and digital-only banks like N26 and Revolut are springing up to deal with this method of frictionless payment, challenging traditional banks as they do so. Falling behind means losing business, and fintech is disrupting the rules of business. The trend towards instant accessibility is raising client expectations: companies need to ensure that they’re providing a high-quality online service to their customers if they want to remain competitive. Whether it’s a mobile-friendly service or a 24/7 helpline, flexibility and digital accessibility are today’s keywords, and this is creating a demand for faster, more efficient ways of doing business. Innovation in Auditing The rise of fintech has also brought about a revolution in the role of the auditor. Blockchain technology has repeatedly been hailed as a breakthrough in the burgeoning crypto economy, receiving more than £500m of investment in the UK alone over the past year- and for good reason! Blockchain is a decentralised online ‘ledger’ that records all transactions made for a particular company. Each transaction creates a ‘link’ that is locked into an online chain of similar transactions and makes it extremely difficult to tamper with; to interfere with one transaction, you need to tamper with all of them. The biggest challenge an auditor faces is having the relevant data on hand to carry out their daily responsibilities; now that businesses are operating essentially in ‘real time’, a blockchain ledger containing essential data for any business can be monitored and maintained by the internal audit team, and then verified by an external team. For anybody working in accounting, adopting blockchain is an excellent way to minimise error, risk and enhance accountability, whilst also freeing up time to concentrate on other important tasks. AI and Conversational Commerce From deep learning to analytics, AI is playing a vital role in influencing the market. Indeed, fintech companies are turning to smart technology to develop new interfaces, such as apps, through which they can learn more about their client base than ever before. Using smart software helps companies in commerce to automate day to day tasks like data analysis, freeing up time normally spent on time-consuming or mundane parts of their job to do more valuable, high-level work. In fact, AI can do everything from draft contracts to analyse customer data and create actionable insights into the way an organisation does business; naturally, fintech companies that provide this software are thriving. The benefits go further. For accounting teams, using automation and RegTech can even help them detect fraud, as the system can process, analyse and monitor customer behaviour to detect suspicious transactions and flag them for further investigation. With so many uses, it’s no wonder that fintech is paving the way for teams to do their day to day jobs more efficiently than ever before. An interconnected market With all of this innovation taking place, we’re expecting to see more collaboration between big business - especially in commerce - and smaller start-ups, as both sides seek to leverage the other's expertise and gain more visibility in the market. Companies like Mastercard are partnering with and nurturing start-ups in order to encourage innovation within the market; still others, like Visa, are partnering with start-ups like Paidy, which offers post-payment credit services for eCommerce customers in Japan. As the fintech market expands, expect to see more of this collaboration, as firms grow closer together in order to innovate their customer offering. Looking to the future with Marks Sattin At Marks Sattin, we’re excited to see what the future will bring for the commerce industry, especially as fintech strengthens its grip on the market. It’s time to get involved: take the next step in your career and become part of the change with our range of jobs in commerce and industry, or read our blog for more insights.