Articles - 24th July 2019

Uber and Lyft drivers continue the search for a better life

Words by Emily & Jack

Tax changes forced on self-employed people working in the public sector from 2017 are now set to reduce the take-home pay of 170,000 contractors working for private sector clients. 

This comes at a time when Simply Business data reveals a 31 per cent annual rise in people looking to go self-employed last year.

On 11 July 2019, the government published the draft legislation for extending the IR35 rules to the private sector from April 2020. Here are some key points to note if you’re a contractor:

  1. Any private sector client you work for will be responsible for working out whether your contract falls inside or outside of IR35, taking this responsibility away from you.
  2. Any private sector client you work for will need to complete a status determination for you – this is to try to stop the practice of ‘blanket rulings’ placing all contractors inside IR35 (but they can still require you to go on their payroll).
  3. A new ‘client-led status disagreement process’ will be introduced instead of the independent appeals process that’s been called for – if you dispute your status determination you’ll only be able to appeal to your client, who may have an interest in your contract falling inside IR35.
  4. Small companies, as defined by the Companies Act, will be exempt from the new legislation.

How to prepare for the IR35 reforms next Spring. 

With the IR35 reforms coming in April 2020 it’ll be up to the company hiring the freelancer to determine whether they’re an employee of a contractor. As this reform has been introduced in order to stop freelancers avoiding tax payments, it is feared that private sector companies will class all their contractors as employees out of ease and in order to not get penalised for incorrectly categorising the people they hire.

So, how can you ensure that you, as a genuine contractor, don’t get roped into paying more tax than you owe? One option that many freelancers are taking is using an umbrella company. This will not only confirm that you are a freelancer under the IR35 standards, but will also manage your tax and payroll admin.  

IR35 shouldn’t worry you if you’re ‘genuinely self-employed’, according to Gorilla Accounting 

The potential pitfalls that IR35 could bring have been exaggerated, according to Gorilla Accounting, a specialist firm for contractors and freelancers.

From April 2020, private sector clients will be responsible for assessing whether contractors are self-employed by applying the IR35 criteria. This shifts the responsibility and risk, which has hitherto been that of the contractor, onto the end client. The change in legislation excludes engagements with small companies, where contractors will continue to determine their own IR35 status.

For a £10,000 project, it is estimated that a mistaken classification can cost contractors over £5,000. Over the next few months HMRC will release further guidance on the new legislation. However, Gorilla Accounting believe that a proactive approach is crucial, alongside having contracts properly reviewed by specialists is the most reliable way to avoid any issues.

The criteria surrounding who is considered an employee for IR35 purposes is not changing; the only change is the party who determines this. Therefore, Gorilla Accounting believe the demand for contractors and freelancers will not be affected, and the flexible workforce should remain an important part of the so-called gig economy.

Financial reimbursement from clients set to strengthen gig worker rights

In a recent Government consultation, it was agreed that UK employers will have to pay compensation to workers whose shifts have been cancelled last minute. It is encouraging to see that efforts are being made to give freelancers more financial security, certainty over hours and days they will have to work and make businesses adapt more to the changing nature of work.  

Uber and Lyft drivers are protesting for their right to better working conditions

On Friday, Alva and about 40 other Uber and Lyft drivers gathered in downtown San Francisco to demand the ride-hailing giants for better conditions. The gig economy workers were protesting for higher pay and a union.

Uber and Lyft have previously called for amending current laws to allow for more worker benefits, including paid time off and retirement planning, irrespective of worker classification. They also supported the establishment of a new driver association that would represent driver interests and administer benefits.

“We’re the ones that have helped these companies become rich,” said Linda Valdivia, who’s driven for Uber and Lyft for about three years. “We want to claim our own rights as drivers. We want to have our own benefits.”

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