The latest changes to the rules around how much tax contractors pay sees the IR35 rules move to the medium and large private sector companies.
This means private sector companies will be responsible for determining whether or not contractors they engage should be treated as off-payroll workers or full-time, salaried employees when paying tax. Previously, it was up to the contractors to self-declare their tax status. Previously it was public sector contracting only.
The banking sector is a massive employer of IT contractors so much of the tax paid comes from the sector.
But the baking sector is also a heavy user of offshore IT services, which according to a financial services IT professional contact of mine, could be increased as banks try to avoid complications.
Here is what he said: “If IT contractors are to be taxed like employees but without the staff benefits, I imagine many will either seek a rate rise or ask to become employees. Neither of these options will appeal to the banks so it gives them a perfect reason to move more IT roles offshore.
So I would expect more brain drain and banking IT job cuts in the UK. If the government gets too greedy, global businesses can and will find alternative solutions.”
My colleague Caroline Donnelly has written extensively about IR35. You can read some of her articles here.