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IR35 Into The Private Sector

21/02/19 | Business, HMRC, Tax Advice


Extension of IR35 into the Private Sector

Any changes to IR35 legislation won’t apply until April 2020, so why are we talking about it now? And what could this mean for Sidekick clients?

What is IR35?

The Intermediaries Legislation (IR35) has been around since 2000 – its aim was to remove the tax advantages of providing services via a limited company for individuals who are not truly in business on their own account. It asks that if your working practices are aligned to that of an ‘employee’ you pay tax in the same way an employee would.

Despite amendments to IR35 over the years, Government still believe that too many limited company owners are still illegitimately working outside the rules and want to change that.

IR35 in the public sector

New ‘off payroll’ rules were implemented in April 2017 for contractors working for public sector bodies. Instead of contractors themselves being responsible for determining their IR35 status, this obligation has been handed to the end client.

Where a contractor is deemed by the client to be ‘inside’ IR35, the client must deduct employees’ NICs and income tax from the contractor’s pay, as well as paying employers’ NICs.

IR35 in the private sector

At the 2018 Budget, the Chancellor announced that the ‘off payroll’ rules will be extended to most private sector businesses from April 2020. Only ‘small business’ clients will be excluded.

So, what will this mean post 6th April 2020

We are still waiting on the final government consultations, when we will know more, but it is likely to mean

  • It will no longer be the decision of the PSC to determine their IR35 status if they are engaged by a large or medium business (awaiting final definition of small business)
  • The decision will now become that of the end client/hirer
  • Should the decision be a ‘fail IR35’ position whoever makes the payment tot the PSC bank account will be responsible for the deduction of Tax and NIC

Sidekick Clients

Sidekick will be updating you as we know more, and will be on hand to answer any queries or questions that may arise, at this stage we are still waiting on further details from HMRC so it is very much a ‘watch this space’…

 

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