HMRC estimates that up to a third of workers operating via a personal services Ltd Company are incorrectly classifying themselves, leading to projected economic losses to the UK Treasury of approximately £1.2bn per annum.
In order to combat this, they are tightening up the rules on IR35.
Essentially the fundamental tenant remains: Any individual deemed ‘inside’ IR35 (who is therefore considered to be operating in the same way as an employee for tax purposes, rather than on a self-employed or consultancy basis) must pay income tax and NIC contributions. Any individual deemed ‘outside’ IR35 is classed as providing a genuine business to business service and is therefore not subject to the same tax treatment as employees.
However, whereas historically it has been the contractor who has decided if they fall within IR35, it is now the end client who now has the legal responsibility.
Having rolled out a similar initiative in 2017 in the Public Sector, it is now the turn of the Private Sector.
We have provided a range of information, some in conjunction with Socium, our sister company.
Above all, if you are uncertain about any of this, please reach out to us and also seek independent advice.
Darrell Atkins, Divisional DirectorContractors should not panic, but they do need to seek advice from the appropriate places (be that their payroll provider, accountant etc). This change is happening, so heads in the sand will not work..
Christian Pascale, Divisional DirectorIt is important that companies begin thinking about their IR35 obligations now, since any new contracts being signed of 6 months or over, will be covered by the new legislation in April.
Donna Murphy, Client Engagement ManagerIt may well be that businesses now want to look at permanent recruitment options. We have the skills to be able to advise you on that transition.
Gary Shayler, CEOSecuring top talent will still be vital, and we will be able to offer you up to date market intelligence on what is happening.
Hema Patel, FDIt is important that businesses put a plan and processes in place and that external advice is sought.
08 Aug 2023
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