More than six months into the revised IR35 regime for the public sector and reports show that more contractors are being caught by the legislation. This, combined with announcements in the Autumn Budget that the rules could soon be rolled out to include the private sector, makes understanding IR35 legislation more important than ever before.
The Chancellor’s Budget document revealed that the government is preparing to consult on off-payroll working in the private sector, of which the findings will be published in 2018.
Since April 2017, the responsibility to determine the IR35 status of a contractor working in the public sector moved from the individual to the end client. Despite the legislation requiring ‘reasonable care’ to be taken when making the assessment, concerns have been raised that organisations are adopting a risk-adverse blanket approach and declaring contractors inside IR35.
An increasing number of contractors are now beginning to challenge their IR35 status decision with their client, and organisations, including TFL and the NHS, have announced they are reversing this blanket approach to apply the rules on a case-by-case basis.
Being caught by IR35 will see you deemed as a disguised employee, meaning full employment tax and National Insurance Contributions (NICs) will be deducted from the payments that your limited company receives from that assignment.
Whether you’re new to contracting or have been working as a contractor for a number of years, IR35 can be difficult to understand. The legislation exists to determine if an individual is a genuine contractor or full employee working through a limited company to take advantage of the tax-efficient structure.
Contractors need to be aware of the implications for whether you’re deemed inside or outside and the financial implications of each. For example, a contractor paid £200 a day, travelling 2,000 miles per month and registered as a ‘Limited Cost’ trader, would be £750 a month worse off if deemed inside IR35.
Speaking to an IR35 specialist will help you to assess your individual situation. Thoroughly reviewing your contract and working practices will give you peace of mind and help you to decide how best to operate. Champion have access to employment law specialists that can assist with this process.
As a brief guide, the main factors that are analysed when examining whether an assignment falls inside or outside of IR35 are:
For those working in the private sector, your IR35 status is currently still your responsibility and any risk from getting it wrong falls on you.
For more information and advice around IR35 legislation, contact Chris Bloor in our Champion Contractors team on 0161 703 2549 or firstname.lastname@example.org
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