Give us your details and we’ll be in touch asap

Insights

All Articles

Business Services

Business Tax

Personal tax

Probate and Inheritance Tax

VAT

Business Tax  •  Personal tax

New consultation on IR35 changes for private sector

By RJP LLP on 22 March, 2019

Although there were no updates on IR35 announced during the Spring Statement, HMRC has already warned of the impending changes to the current rules for private sector companies.  In a consultation document issued at the start of March, some of the actions that companies should take to prepare for the reforms were outlined.

These include:

  • Identifying and reviewing "current engagements with intermediaries", including personal service companies (PSCs) and labour supply agencies;
  • Implementing "comprehensive" processes to determine the employment status of contractors.

HMRC is consulting on how to finalise the new legislation that will effectively make businesses liable for the employment tax status of any private sector contractors who work through PSCs, starting from April 2020.

In the document, it was clear that although these changes won’t come into effect for a year, there is an expectation that businesses should already be operating as if they were currently legislated where they would apply.

So, if businesses are using contractors that operate through PSCs and that may be subject to IR35, they should be reviewing their processes and making the necessary payroll changes. Small businesses are currently exempt from the changes and the reforms are not expected to operate retrospectively.

 

What is IR35?

Tax legislation known as IR35 is designed to ensure that consultants who are operating through limited companies (also known as PSCs) do not have additional tax advantages over regular employees. They specifically require that employment taxes (national insurance contributions and the relevant rates of income tax) are paid by any professional services providers that would otherwise be regarded as an employee of the engaging business.

Currently, the onus is on contractors to be responsible for payment of employment taxes where IR35 applies, but after the new rules come into operation, it will be the engaging business that decides and is liable. In addition, the ‘engager’ will also be required to deduct PAYE and pay employers' NICs automatically.

If you are worried about IR35 or the new legislation please contact us directly to discuss.

Read more articles like this

Vans redefined as cars. What are the vehicle tax implications?

How to apply the temporary 5% VAT rate – Update for the hospitality sector

Summer Budget 2020 Update

VAT payment holiday window ends on 30 June 2020

Domestic reverse charge VAT rules are delayed until 2021

Share this:

All Articles

Business Services

Business Tax

Personal tax

Probate and Inheritance Tax

VAT

Image

31 December 2020 - Review disposals of chargeable assets to avoid a possible CGT increase

Capital gains tax is due to be reviewed by the government and if a CGT rise is announced, the new rates may become effective from the next tax year on 6 April 2021. Take advice now if you are thinking of selling property or have other assets giving rise to a capital gains tax liability.