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Chancellor confirmed IR35 legislation change for the private sector!

From April 2020, it was verified that contractors working for private businesses will now contribute more to higher tax and national insurance.

IR35 legislation first came into force in April 2000. It is an anti-avoidance tax legislation devised to challenge ‘disguised employment.’ In other words, the law generally tackles those people who provide their services to hiring companies through their own limited company and who endeavour to evade paying tax and national insurance.

In April 2017, reforms to IR35 had been hit to the public sector. But, it was confirmed in the Autumn Budget 2018 that numerous private sector contractors too will no longer be blameworthy for determining if they are grasped by the IR35 regulations and may see their national insurance contributions rise.

The contractors who are medium (50-249 employees) to large (250+ employees) companies will now determine the IR35 status of the personal service companies they contract with.

The changes primarily implicate altering the responsibility of verifying the IR35 status from the worker to agency or end client engaging the worker. If the worker is detected by IR35, the agency or end client will also be in control of calculating the tax and national insurance deductions as they would for employees.

As this will come into play from April 2020, the government have given businesses and individuals enough time for preparation.

In a brief summary to the IR35 reform, the chancellor said:

“The off payroll working rules – known as IR35 – are designed to ensure fairness, so that individuals working side by side in a similar role for the same employer pay the same employment taxes.”

“Last year, we changed the way these rules are enforced in the Public Sector, but widespread non-compliance also exists in the private sector.”

“So following our consultation, we will now apply the same changes to private sector organisations as well, but after listening carefully to representations made during the consultation, we will delay these changes until April 2020 and we will only apply them to large and medium-sized businesses.”

Click here to find out more information on the new rules for IR35.

If you think you and your business are affected by the new IR35 reform changes and require further legislative help, then please feel free to contact us.


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Posted in: Staff - Tax Team, Tax