Proposal to restrict tax relief for travel expenses for IR35 workers!

One of the controversial measures included in the draft Finance Bill 2016 was the proposed restriction of the deduction for travel and subsistence expenses incurred by certain workers caught by the IR35 rules. This proposed change was consulted on during summer 2015 and, if enacted, will significantly restrict the tax relief available for those affected.

The original proposals have been toned down to a certain extent and will only apply if the IR35 rules apply to the engagement and there is supervision, direction and control (SDC) over the worker. This now seems to be the key test to determine whether the new rules will apply and ignores the other employment status factors. The examples in the consultation document seem to suggest that if there is no expertise within the end user organisation then there is likely to be limited SDC and the worker will be entitled to relief for travelling to the client’s premises.

Any tax debt arising from the deliberate misapplication of the rules is to be transferred ‘jointly and severally’ from the ‘intermediary company’ to its director(s). It would appear that the ‘engager’ will not now be liable, which was one of the proposals in the consultation. It is intended that these rules will be implemented where it can be shown that the ‘intermediary’ had knowingly failed to apply the rules correctly.

Please get in touch with us if these new rules are likely to have an impact on your business.

☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com 

5 simple steps for a Perfect Elevator Pitch!

Our “elevator pitch” is the short, concise answer to "What do you do" that you can give in the time it takes you to move up a couple of floors in an elevator with someone. So, as a contractor or small business, if you were to write your elevator pitch today how would you do it?

5 Steps for a Perfect Elevator Pitch

Here are a few tips:

1.    To begin with, write down one sentence about who you are and what you do. This can be something along the lines of "I am an accountant who works with local businesses and helps with business planning in addition to the traditional audit and tax services."

2.    Next, write one sentence describing the benefits of what you do. Focus on the customer and what they gain as a result of engaging your services.

3.    The next step is to describe your ideal clients and/or customers. For example you could say, “In general, I specialise in the SME sector, working with owner managed businesses. In particular, I have helped a lot of owner-managers with succession planning issues.”

4.    Now you need to describe what makes you and your firm unique. This is your value proposition – what it is that you can offer to your client that they will value and that your competitors do not or cannot offer.

5.    The final part of your elevator pitch is the most important – asking for the business. This can be something subtle such as, “perhaps we could meet for a coffee next week to discuss the requirements of your business and identify areas that I can help you with”.

Your elevator pitch is now complete. Type it up, save it, print a copy to keep in your briefcase and memorise your pitch so that you have it with you when you need it (which could well be in an elevator!)

Don't forget that the elevator pitch has to be short and intriguing at the same time.

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What should I do if my contract is caught within IR 35?

Accounting Tips for Contractors:

We often get asked about the best way to extract money from a limited company if contract is caught by IR 35.

First and foremost, the only way to be sure whether your contract falls inside or outside IR35 is to have it review by professional accountant firm who are specialised in Contractor Accountancy services.
Note : At APJ Accountancy, we offer this free within our standard package service

And by the way, it works on a contract by contract basis. So, for one contract you may fall under IR35 but for some others you may be outside.

Be aware that every contractors need to be evaluated on their own merits and every contract can be different.

If you aren't sure, you can take the 10 minute Contractor IR35 Test to see if you are likely to be working under IR35 from HMRC website yourself. Click this link to know more information that you need to know about IR35 -  http://www.hmrc.gov.uk/ir35/guidance.pdf

What is the best method to pay yourself?

How to Pay Yourself inside and outside IR35?

Going back to your question the best method to pay yourself, in simple terms

• For Income from all contracts that fall outside scope of IR 35 – you can pay yourself combination of small salary and big dividend to maximise your tax savings.

• For income related to contracts that fall inside scope of IR 35 – You may need to pay some additional PAYE and National Insurance on the taxable income from these contracts at the end of the financial year.

So your company will continue you pay you as usual throughout the year deducting PAYE and NICs as applicable.

At the end of the tax year you will need to check you have paid the right amount of tax and NI by calculating the deemed employment payment due on the IR35 contract(s) undertaken.

If you don’t know much about deemed payment then a step-by-step guide for and related NICs can be found on the HMRC website.

HMRC also have a IR35 ‘deemed salary’ calculation spreadsheet which can be downloaded. Click link to download the spreadsheet. www.hmrc.gov.uk/ir35/ir35.xlt 

Alternatively, contact us to discuss how we can be of help in calculating your IR35 contract(s) ‘deemed salary’ and NIC liabilities.

Visit www.apjaccountancy.com/contractor-accountant.html for more information.

Are you a contractor working under IR35 ? Let us know how you do the salary payment. Feel free to post your thoughts as comments below and share it with your friends.