HM Revenue and Customs (HMRC) introduced the ‘intermediaries legislation’, which became known as IR35, in the 2000 budget. The legislation was introduced to combat ‘disguised employees’. This refers to an individual who would be treated as an employee were it not for the fact that they provide services via their own personal service company (PSC), and paying less tax in the process.
In 2017 the Government shifted the responsibility of determining the status of contractors to organisations in the public sector.
In 2020 the same reform will be rolled out in the private sector and from this date, medium and large businesses (and similar unincorporated bodies) hiring contractors will be liable to determine their off-payroll worker’s status.
If you currently trade through your own limited company (Personal Service Company or PSC) you may be concerned about the changes arriving in 2020.
As we mentioned above, from April next year medium and large-sized businesses will be responsible for determining the IR35 status of the contractor; if you are in engagement with small business then the assessment process stays with you – the contractor.
What you can do to prepare:
It is worth noting that nothing will change until the legislation is actually in place on April 2020. Until then contractors are still responsible for determining their own status. If your end client is a small business nothing will change even after the reform.
If a contract is deemed to be inside IR35 working through an umbrella company such as SmartWork could be the perfect solution.
The primary function of an umbrella company is to organise payment for fixed-term work undertaken by independent contractors. When signing up with an umbrella company such as SmartWork, contractors become one of its employees with it acting as an intermediary between them and their agency, or directly the end client if no agency is involved.
Through our sister company SmartWork, we provide a full package with a host of additional benefits.
Should your current engagement fall inside IR35 and you wish to keep your company for contracts outside IR35 we offer an option for you to do just that. With a fixed monthly fee of £95+VAT, we will oversee your umbrella income and also look out for your limited company, so that it is ready for you to pick up where you left off.
It is important to remember that despite the changes in legislation, working outside IR35 and via a limited company is still the most tax-efficient way of trading.
As a compliant accountancy practice, we have a duty of care to our clients when it comes to IR35, and keeping them updated with all legislation is a part of that commitment. That is why we have teamed up with IR35 specialists Qdos Contractor, who have the knowledge, and expertise to conduct a full contract review granting you complete peace of mind.
Trusted by over 40,000 UK contractors, Qdos offer a comprehensive range of policies, including professional indemnity, public & employers’ liability, tax liability insurance and much more covering the key risks you face every day.
They offer a 10% discount and FREE IR35 assessments to MyAccountant clients when you purchase insurance – an excellent way of demonstrating that you have operated due diligence in determining if your IR35 status.
Make sure that you contact your accounts manager for more details and get your unique code for the offer.