The introduction of new IR35 Rules for both Public and Private sector organisations will impact millions of contractors across the UK. It will place new duties on employers to recognise the employment status of workers andpay their tax and National Insurance costs, where previously they may not have been required to.
What is IR35?
The IR35 rules were created to ensure that employees who disguise themselves as contractors for tax reasons, pay broadly the same employment taxes as PAYE employees.
The rule applies to individuals (workers) who provide their service through a Private Services Company (PSC), but without this intermediary would be taxed like a normal employee.
Changes from the 6 April
Despite having been in force since April 2000, IR35 is heavily criticised by tax experts and the business community as being poorly conceived, badly implemented by HMRC and causing unnecessary costs and hardships for genuine small businesses. This is why the Government is replacing the original IR35 legislation with the new Off-Payroll Tax, which was initially introduced into the public sector in April 2017. From 6 April 2021 this policy will be extended to the private sector. It is important that businesses, contractors and freelancers are aware of the change. Businesses that hire contractors or freelancers need to prepare for the changes to avoid any disruption.
How can Hentons help?
Businesses will need to make sure they have a robust audit trail, as it is a legal requirement to keep records. They may also need to consider changes to working practices and contracts. So, if you are unsure of the rules and how they could impact you or your business then we can help.Contact us today.
As with any changes to tax legislation, if you do not abide by this new legislation you could be subject to an HMRC enquiry. Even if your affairs are in order this could be a worrying, costly and time-consuming process.
By acting now and ensuring you understand these changes, you could be saving yourself from large professional assistance fees in the long run.
So, if you are unsure of these changes, please contact us today.
At Hentons we do recommend that our clients have suitable HMRC fee insurance cover in place. By taking out fee insurance with us, would mean that in the event of most tax enquiries, you or your business (depending on who takes out the insurance) would not need to find the money to pay for our professional assistance for fees, covering you up to £100,000.
Professional fees can be significant in the matter of an enquiry, so it is wise to have suitable Fee Insurance in place, to protect you if the worst does happen.
Our fee insurance for contractors is £20 per month, so if you want to know more about this and any other Tax Advice, please contact Simon Roberts.