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In mid-July HM Revenue and Customs (HMRC) confirmed that from 6 April 2020, IR35 ‘off-payroll’ rules, currently operational in the public sector, will extend to the private sector. The tax regulations are designed to reduce tax avoidance by contractors whom HMRC believes to be ‘disguised employees’. Undoubtedly, subcontractors in industries such as IT or construction, who work in a similar way to full-time employees but bill for their services via their limited companies may fall inside these rules.

Undertake checks

The new legislation will require the client organisations to undertake checks to determine whether the worker should be treated as an employee or as self-employed for tax purposes.

Higher tax bill

It goes without saying that being deemed inside IR35 will mean a higher tax bill, potentially for both the ’employer’ and the ’employee’. Although these new rules will apply to all medium and large organisations, they will be less likely to affect sole trader businesses.

Useful infographic

To help you navigate these changes, we have put together a simple infographic. It outlines just some of the things you need to consider to build a stronger case and ensure you fall outside IR35 ‘off-payroll’ rules.

Call an expert

Nevertheless, IR35 legislation is notoriously complex and ambiguous. Payroll professionals or your accountant will be ideally placed to advise you. Call us for up-to-date advice on 01785 243276.

*Sources:

https://www.contractorcalculator.co.uk/what_is_ir35.aspx