Of the many different factors that have played a part in shaping the economy of the past few years, the growth of the contractor market is one of the most significant. Even taking into account the banking crisis, the historically low interest rates and, more recently, Brexit, the fact that more people than ever are choosing to take on a flexible working lifestyle outside the boundaries of the traditional nine-to-five ‘job for life’ concept is something that is helping to define the 21st century.
However, various influencing factors, both nationally and internationally, mean that the contractor market is in a state of constant change. The forecast for 2017 is, therefore, something that interests many business owners, professionals, and freelancers across the contracting sector.
During the past year, some significant changes have started to have an effect on the contracting sector and these will continue to reverberate throughout next year as well. The clear timetable to reform IR35 in the public sector has been one such case in point. Following various trails and consultations, the proposed IR35 changes will come into force from April 2017. This means that contractors will have to maintain compliance with the new HMRC regime.
The IR35 in detail
The IR35 covers the rules and regulations governing how contractors are classified – whether, for example, a contractor is classed as self-employed or as an employee. This has important ramifications because if you are a contractor or freelancer, this determination will affect the way that you are taxed. To summarise, HMRC views being self-employed as meaning that you are in control of when, how and where you work. This will not be the case if, for instance, you have fixed hours employment, which requires you to be at one location, and if you are working under the direct control of a manager or other superior.
Changes to the public sector
The public sector employs many contractors, and up until now responsibility has been on the individual to state whether or not they are self-employed. Starting from April 2017, this will change, with the responsibility shifting to any public sector bodies that hire contractors. The rules for the private sector will, however, remain the same.
How to manage the changes
One of the additional responsibilities of being a contractor is that you need to look after your own affairs, which can sometimes lead to extra work, or even to problems if you don’t follow the official rules and regulations. This is particularly the case when it comes to dealing with the taxation authorities. For contractors who use a service company, such as Crystal Umbrella, the situation can be more straightforward because someone else will be looking after all the details on your behalf. This doesn’t mean, of course, that as a contractor you should ignore changes to the law, but if you use a third-party company to look after you, it means that you can get on with your business reassured by the knowledge that you are working totally within the law. Not only that, it will also mean that you won’t be presented with any unexpected tax bills.
One of the big trends of 2016 has been the so-called ‘rise of the super-contractor’. This has meant that individuals with a specialist skill, or who have experience in a certain niche, have been able to make the most of the economics of supply and demand. Many employers are willing to pay a high premium for high-demand skills and qualifications, which means that canny contractors have been making a killing in areas such as cybersecurity. In some cases, this has led to five-figure day rates being offered and has ushered in a two-tier system among the UK’s contractor population. There is no reason to expect this trend to end anytime soon, so it looks as if 2017 could be a big year for you if you are lucky enough to be one of those people whose talents are in popular demand.
The pros and cons
As always, for those who choose a self-employed lifestyle, there will be pros and cons, which is yet another factor that is likely to be the case in 2017. The solution is to make sure that the positives outweigh the negatives. As long as you have set up your business on solid ground, you should be in a position to take advantage of the changing market conditions and to adapt to make sure that things always work in your favour.
IntelligentHQ Your New Business Network.
IntelligentHQ is a Business network and an expert source for finance, capital markets and intelligence for thousands of global business professionals, startups, and companies.
We exist at the point of intersection between technology, social media, finance and innovation.
IntelligentHQ leverages innovation and scale of social digital technology, analytics, news and distribution to create an unparalleled, full digital medium and social business network spectrum.
IntelligentHQ is working hard, to become a trusted, and indispensable source of business news and analytics, within financial services and its associated supply chains and ecosystems.