What is IR35?
IR35 is tax legislation that was introduced in 2000 and is designed to combat tax avoidance by workers supplying their services to clients via an intermediary, such as a limited company or a payroll provider.
HMRC believes that only 10% of those who should be applying the rules do so and this will cost the exchequer £1.3 billion in 2023 / 2024.
Such workers are called ‘disguised employees’ by Her Majesty’s Revenue and Customs (HMRC). If found to be “inside” IR35, the contractors will have to have income tax and national insurance contributions (NICs) deducted at source as if they were employed.
What is changing?
From April 2021, the incoming legislation will put the responsibility for determining IR35 status on the end user rather than on the contractor or the agency. The end user may also be asked to pass the status determination and reasons for the determination down the contractual chain together, as well as passing them directly to the worker.
These changes were due to take place in April 2020 but this was deferred by 1 year due to the Covid outbreak. In July this year it was given Royal ascent and is therefore now law. Given the amount spent by the Government handling the Covid outbreak, general opinion shows that it is almost a certainty IR35 will come in to force in the private sector from April 2021 to help rebalance the books.
OVER THE COMING WEEKS, WE ARE HOLDING A SERIES OF IR35 SESSIONS VIA MICROSOFT TEAMS SO PLEASE CONTACT US TO FIND OUT MORE OR IF YOU WOULD LIKE TO ATTEND.