Many companies are predicting IR35 reforms to extend into the private sector this year, after rules were introduced for the public sector in April 2017. What is IR35 and how can the reforms affect your business?
What is IR35?
IR35, which came into effect in 2000, is an anti-avoidance tax legislation designed to challenge the tax paid by contractors who are involved in off-payroll working, providing their services as a “personal service company”. As HM Revenue & Customs explains here:
“A worker is involved in off-payroll working when they work 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.”
Put simply, this legislation affects contractors who are not deemed “self-employed” by HM Revenue & Customs. Without this legislation, off-payroll workers could make tax savings by receiving payment to their personal service company, which they could then draw dividends from.
IR35 reforms in the private sector
Rules were introduced in April 2017 that the IR35 status is to be determined by the client, not the contractor. However, this is only in regard to the public sector.
While these tax changes do not apply to employees on the payroll, they do affect agency workers in the public sector. This includes workers in the NHS, schools, councils and other education establishments.
With the government seeing increased compliance in the public sector since the introduction of these rules last year, IR35 reforms within the private sector could be announced in this year’s Autumn Budget in November 2018. In December 2017’s IR35 forum minutes here, private sector reforms were discussed, with an acknowledgement that consultations will take place in 2018, although no date has been set.
Update: The IR35 Consultation has been launched. Find out more here.
The TBL Accountants team will keep you up to date with the latest IR35 news as it happens. If you have any queries or want to know how these reforms could affect your business, get in touch with the team today.
TBL Accountants are your local accountancy firm operating in Southend and across Essex. We specialise in a variety of services as personal, business, and charity accountants. Want to find out more? Get in touch with our team today.
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