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IR35: Is Next Year Going To See A Massive Change?

It may change how contractors are accounted for ...

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Back in 2000, the then chancellor, Gordon Brown, introduced what is commonly known as IR35 legislation in an attempt to stop 'disguised employment' ...

IR35 legislation is tightening up and it's important both employers and contractors know their status!

IR35 legislation is tightening up and it's important both employers and contractors know their status!

copyright: chrisdorney / 123rf

It was designed to prevent contractors working through their own limited company to avoid tax when, in reality, their working arrangements reflected employment. The key saving in tax has narrowed recently, but the main saving is the employer's national insurance levied upon the business engaging with the contractor.

"IR35 is really complex!"

It's often hard to determine whether someone is genuinely a self-employed contractor or an employee and in true Essendon style, we collaborate with an IR35 specialist who will quite happily review our clients' contracts and give their opinion.

Successive Governments have claimed that too many limited company owners are still illegitimately working outside the rules so as a result, Phillip Hammond took the bull by the horns and in April 2017 implemented new 'off payroll' rules for contractors working for public sector organisations.

Instead of contractors themselves being responsible for determining their IR35 status, this obligation has been handed to the engager of each contractor, i.e. the client. Where a contractor is deemed to be 'inside' IR35, the client must deduct employees' NICs and income tax from the contractor's pay, as well as paying employers' NICs.

Phillip Hammond then went further in the Autumn Budget 2018 to announce that off-payroll working rules for the public sector will be extended to the private sector in 2020 and apply to medium and large companies.

This means that the clients a contractor works for – rather than the contractor themselves – will be responsible for reporting whether they fall in IR35 or not. If you think this may affect you, further reading to prepare you for the IR35 changes can be found here.

"Would you like to know more?"

If you're worried about IR35, either as an employer or a contractor, then do give me a call on 01908 774320 or click here to ping me an email and let's see how I can help you.

Until next time ...

Business Godparent

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More about Roger Eddowes ...

Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.

Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.