Services
Audit & Assurance
External, internal and joint venture audit services
Business Advisory
Management accounts, strategic planning, profit improvement, ESG
Corporate Finance
M&A advisory, selling a business, fundraising, valuations, due diligence
ESG
Baseline assessments, materiality assessments, carbon footprint and sustainability reporting
Hotel Accounting
Accounting function, automation, daily reconciliations and dashboards, accounts payable
Payroll & Employment
Payroll, global mobility, employee benefits, employment taxes
Private Clients & High Net Worth Individuals
Tax planning & compliance, tax residence and domicile, trust planning
Restructuring & Recovery
Business rescue, liquidations, administrations, insolvency, debt recovery
Tax
Corporate tax, customs duty, VAT, R&D, tax investigations, international tax
Virtual Finance
Bespoke service providing real-time information about your business performance
More from AAB
AAB PEOPLE
Full-service people consultancy – human resources, learning and development
AAB WEALTH
Financial planning, cash flow modelling, retirement planning
AAB Consulting
Business consultancy helping organisations with the challenge of change
Sectors
Business Services
Professional services, medical, recruitment and media
Construction & Property
Property developers, construction companies, housebuilders, landlords
Energy
Renewables, clean energy, energy producers, energy transition, exploration and production
Family Business
Specialist support for businesses owned/managed by families
Food & Drink
Food & drink producers, processors, importers, wholesalers and retailers
Industrial
Engineering, manufacturing, aerospace, automotive, shipping, distribution
Leisure, Retail and Hospitality
Fashion, entertainment, activity centres, hoteliers
Not For Profit
Charities, social housing, higher and further education institutions
Public Sector
Government, non-departmental public bodies, health boards, ALEOS
Technology
Software companies, tech start-ups, cybersecurity firms, and AI innovators.
About
AABout Us
Our story
Our Team
Meet the specialists
Careers
Join the AAB team
Diversity & Inclusion
Building a business where everyone feels they belong
Growing Sustainably - ESG
ESG – Our commitment to building a sustainable business
News
Latest news from across AAB Group
AABIE
AAB charitable initiative
AAB Wealth expands presence in Central Scotland with acquisition of Synergy Financial Planning
Insights
Blogs
Stay informed with cutting-edge news for business growth. Our experts offer industry insights and invaluable advice on accountancy and business strategies.
Case studies
Explore insightful case studies tailored to specific industries, offering invaluable lessons and strategies for success.
Webinars & Events
Engage with dynamic webinars and events tailored to your interests, offering valuable insights and networking opportunities.
ESG Diligence: The Key To Sustainable M&A Transactions
AAB / Blog / More Costs on their way for Contractors & Service Companies?
BLOG7th Aug 2018
Aberdeen, more than most, has given much thought to the effects of the off-payroll working rules introduced into the public sector in April 2017, and the potential repercussions if these rules were rolled out into the private sector.
On the 18th of May the government launched the much anticipated, or dreaded, depending on which side of the fence you sit, consultation document regarding “Off-payroll working in the private sector”.
This has essentially confirmed HMRC’s intention to introduce the public sector rules into the private domain. The basis of the consultation rests on HMRC’s motivation to recoup the touted £700 million in tax and National Insurance revenue that is currently being foregone by non-compliance. HMRC speculate that only 10% of people who should comply with the existing private sector IR35 rules are actually doing so. This, coupled with the projection that this figure will rise to £1.2bn by 2022/23, has fuelled another wave of reform.
Following the public sector changes introduced in April 2017, responsibility for compliance with the IR35 legislation has been shifted from the individual contractor, to the public body or recruitment agency. As predicted, this has reportedly triggered an exodus of IT contractors within the public sector, as well as an increase in day rates to compensate for the reduction in take home pay. In spite of this, HMRC have stated that “the available evidence shows that the public sector reform has been effective in tackling non-compliance with the off-payroll working rules”.
In sharp contrast, those at the heart of the changes believe that “chaos and confusion” continues to define public sector reform, so the Government would be taking a huge risk to press on and extend changes to the private sector. In view of this, we believe that instead of a further kneejerk reaction to off-payroll working, the consultation should offer HMRC with an opportunity to thoroughly review the impact of the reform within the private sector, whilst taking into consideration the views of those not only affected directly by the proposed changes, but throughout the supply chain as a whole.
The proposition that we could see the public sector rules integrated into the private sector becomes even more concerning following the decision in the recent case of Jensal Software Ltd v HMRC. In brief, HMRC completely misinterpreted the application of their tripartite employment test; namely mutuality of obligations, substitution, and control, which if applied correctly would have clearly pointed away from a contract of service. Despite this, the revenue chose to pursue the case claiming a sum of £26,000 was due in back taxes. Luckily, this backfired with the tribunal judge finding that the relationship was wholly indicative of a contract of services.
Furthermore (and perhaps worryingly), HMRC’s online “Check Employment Status Tool” which is to be used as the first line in determining employment status does not even incorporate the Mutuality of Obligations test, which is a cornerstone of the employment test. If these rules are to be rolled out universally across all contractors, HMRC must introduce a more dynamic system to assist both contractors and employers alike. Failure to do so is likely to lead to a further round of chaos within the IR35 arena.
Here at AAB we will be monitoring these & contributing to the consultation to ensure that we are well placed to advise both existing, and future clients how they may need to prepare for these potential changes and the impact and costs on their business. In Aberdeen particularly, the costs and changes will hit the heart of contractor and service company businesses, probably for the worse.
For more information please contact Charlotte Stewart (charlotte.stewart@aab.uk) or your usual AAB contact.
To find out more about Charlotte and the Payroll & Employment Taxes team, click here