If you are a contractor or engage contractors, you must read this update on planned IR35 changes!
The “IR35 rules” were introduced to ensure contractors working through a company, but who were more like employees of the contracting company would pay similar taxes to other employees.
Since April this year, responsibility for compliance with the IR35 has been shifted from the individual contractor to public bodies (such as the BBC).
If a contractor is deemed by HMRC to be an employee it would be the public body which has to pay any PAYE and NIC which ought to have been collected. The new rules also extended to agents who supplied contractors to the public body.
The government have done this because they need the cash. They estimate they could collect an extra £700m a year in tax and NIC.
Public bodies have responded with panic. Rather than defend existing contracts (and risk financial penalties) they have adopted a blanket approach of treating contractors as employees – deducting tax and NIC under PAYE, handing over the balance to the contractor company and letting the contractor sort out the mess.
That move has reportedly prompted an exodus of IT contractors in the public sector, with some departments having to increase day rates in order to retain skilled staff.
Now, the government has opened its long-awaited consultation on proposals to extend these new rules to the private sector. This is bad news. The government’s recent track record is to consult and then ignore anything it is told and plough on with its plans.
If you are a contractor, the company engaging you might adopt a similar approach to the public bodies. You might find your company receiving ‘net’ payments.
If you engage contractors, they might be nervous about what you are planning. Or you might now be at risk if the contract or working engagement terms and practices suggest an employment. YOU would be responsible for PAYE.
Talk to us at Continuum. Our tax specialist Andrew Carter is a former Tax Inspector. He has over 30 years’ experience of dealing with arguments over employment and self-employment and has been dealing with IR35 since it was introduced. He can review your existing contracts and practices and can suggest any changes that might be needed to strengthen your position.
These issues were always important but are now even more so. The government needs cash. And it’s coming for you to get it!
To find out more or to have a chat about your current situation, call Andrew Carter on 01962 832513 or email firstname.lastname@example.org