IR35 Update – August 2019Early July the Government released the draft off-payroll working rules applicable to the private sector from April 2020. It seems all too similar to 2017 when the legislation was introduced to the public sector. No one seems more prepared for this than two years ago...
What is IR35?
The aim of the IR35 legislation is to tackle disguised employment, where organisations hire contractors rather than employing them as staff and paying the relevant taxes through the PAYE system.
The legislation has been in place since 2000, and before 2017 the contractor was able to self-assess his or her status or go to a professional firm for a review.
In 2017 the Government shifted the responsibility of determining the status of contractors to organisations in the public sector.
In 2020 these rules will be rolled out in the private sector and from this date, large businesses hiring contractors will be liable to determine their off-payroll worker’s status.
What is your status?
If you work in the private sector your current status can be self-assessed by HMRC’s CEST tool, although its results have been successfully overturned in court recently in a recent high-profile case.
You can find out more about factors that determine your status here in our downloadable guide.
If in doubt, we recommend seeking assistance from a firm like Abbey Tax specialising in IR35 reviews.
What does it mean for you?
Being caught or (“being inside IR35”) by the legislation means that your working practices too closely resemble those in permanent employment and your turnover has to be taxed as if it was salary. Needless to say that the increased tax defeats the purpose of working through your own limited company.
The draft legislation released in July provides insight into the decision process:
State your status
The new term is “status determinations statement”. This is a declaration that will be required for both the agency and the contractor, including the status decision and the explanation on how the decision was made.
Should the contractor disagree with the determination statement result, they have the right to appeal and get a response within 45 days from the other party.
Stay ahead of the game by
- Talking to your customers and get their view on IR35 and their plans for April 2020
- Keeping a record of your current working practices if you are operating outside IR35, should your status change in April.
Small firm exemption
If your customer is a company with a turnover of less than £10.2 million and employee numbers below 50, you are still able to determine your IR35 status. The company will not have to decide the IR35 status of its off-payroll workers.
These are the latest updates on the legislation for now, but please follow us on here and also on LinkedIn for regular updates.
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