06 April 2021
06 April 2021
IR35 Reforms in force from today
Initially announced in 2019, the new IR35 tax rules come into action in the UK today.
After a year’s postponement due to the pandemic, the controversial new tax laws will affect thousands of employers and contract workers as it pushes them into the private sector.
What is IR35 – a reminder:
IR35 is a tax legislation that impacts contractors who are working for a client through their own intermediary, often a personal service company (PSC) but would be an employee if they were providing their services directly. Often referred to as off-payroll workers, they are paid through their own intermediary, paying Income Tax and National Insurance contributions in a different way to an employee. The IR35 rules are in place to make sure that where an individual would’ve been an employee if they were providing their services directly, they pay broadly the same tax and NICs as an employee.
What Happens Next:
As of 6th April, all businesses that employ contractors should have determined an IR35 status for them – the businesses themselves are liable for ensuring that the contractors are employed correctly. Failure to comply with these new rules could rack up big costs for businesses and they should look into insurance schemes available to cover expert advice, legal representation and fines owned.
HMRC has noted that they will not be handing out penalties for the first 12 months as they are aware of the changes and potential mistakes in sight for businesses as they transition. That said, it is best to take a sensible approach to the change and businesses should not be put off compliantly working with contractors.
Do the IR35 changes affect your business? If you have any limited contractors that need to be moved over to PAYE, we can assist you in the set up. We process weekly in-house PAYE payroll using an online timesheet platform, handle all the paperwork, pay the contractor and send you one invoice. Call the London team to discuss how we can help 020 7242 4909.
Author: Molly McCloy, Marketing Coordinator, Bespoke Careers