PSCs ‘face 20% loss if IR35 reforms are extended’

A second accountant has totted up that PSCs in the private sector could be almost 20% worse-off if last year’s changes to IR35 in the public sector are extended to them.

In a post-Spring Statement briefing, Kingston Smith said that once extra National Insurance and other levies were factored-in, PSCs with private clients may see their costs rise by 17.3%.

Although the firm had to make some assumptions to arrive at the figure, a detailed breakdown by another accountant serving PSCs shows a similar envisioned loss -- 18%.

Calculated by Orange Genie, this second figure is also based on a set of assumptions, such as being decided inside IR35 and, until then, paying 16.5% on the Flat Rate VAT Scheme.

Both accountants point out that the IR35 consultation which many expect to propose extending such taxing reforms to the private sector was absent from the Spring Statement.

But ministerial statements have since showed that the consultation is due “in the coming months” -- a clarification that provides “certainty”, the Treasury has said to ContractorUK.

Kingston Smith thinks the exact opposite. “The review of the employment status rules, and the potential for the off-payroll working rules to be extended, are creating uncertainty for businesses”.

The accountancy firm explained: “If these rules are extended to the private sector, UK businesses would have to deduct tax under PAYE from payments made to certain companies they engage where, if the company was ignored, the person doing the work would have been treated as an employee.”

The firm’s head of tax Tim Stovold says the “silence” from Philip Hammond last week on the review of employment status is more understandable, as it is not due to close until June.

“The chancellor is now expected to make announcements in this area in the Autumn Budget,” he said. “It is hoped that any changes to these regimes [both Employment Status and IR35] will be delayed until April 2020 at the earliest.”