If a tree falls down in a wood and no one hears it does it actually make a sound?
Much could have been said about this with IR35. Every Ltd contractor in town has been up to speed with the impending legislation change, but it seemed to pass through the recent budget without a whisper. If you're not in the sector, it's very unlikely that you would even have been aware of this new play from HMRC to increase revenue for the treasury by levelling the playing field for employees and contractors on the payment of tax. Of course, if you're in the business of hiring contract staff, this years IR35 was 2018's GDPR. We and our clients have been all set for the legislation change originally due April 6th this year, working much of 2019 in preparedness. Who would have envisaged it would take a global pandemic to afford the professional contracting sector a last minute reprieve? Tuesday March 17th, amongst the continuing lockdown of Britain, the contracting community quietly welcomed a delay to policy, now due to be invoked in the new tax year of 2021.
Does this bring comfort to the contracting community? Perhaps a crumb. We're all in the throes of unprecendented macroeconomic events that eclipse the ramifications of the IR35 change had this gone through. I've spoken to many a fellow business owner pallid with fear, visibly shaken at how quickly the financial pandemic has hit, victims of the start of many a sleepless night. Do I lay off staff? How do I pay my rates? What about my lease? For contractors, also in effect business owners, now is the time that many die by the sword. The unlucky ones will be victims of short notice, or even immediate exits from the businesses they have supported. Perhaps this is what will build the business case to ensure that contractors may continue to operate in managing their Ltd companies as they always have done. Prudent contractors, like prudent business owners, will have built in an element of cashflow redundancy in their business such that a buffer of cash can see them through the unforseen. A lesson I learned quick and hard from the last recession. (I talk often of the "time to death" before I burn through cash reserves in my bank in the event a storm). And what for the future? Can all businesses be forced to maintain a level of cashflow in the way that banks are stress tested to hold a degree of liquidity in theirs? Are any of us surprised that just 2 weeks into an escalating crisis, household names like Virgin and BA are talking about government bail outs, and 2 months unpaid leave for staff, when in 2019 they talk of record breaking profits? I certainly am. However, I am also encouraged at how much fire power governments are throwing at keeping us all on an even keel. Hold on to your hats!
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Be safe out there.