Solicitor Andrea Corr, in our Employment Law team, summarises the new IR35 tax regime and how it may affect employees and employers.
In April 2019 the Government carried out a consultation into the potential extension of the “off-payroll working” (IR35) arrangements, that currently apply in the public sector, to the private sector.
Following the consultation the Government published rules for off-payroll working and draft legislation in July 2019, the effect of which would be to extend the IR35 rules into medium and large private sector businesses with effect from April 2020.
The Government is extending the arrangements as a means of addressing the perceived abuse of tax and national insurance contributions in such arrangements within the private sector.
The changes are expected to affect medium and large private sector businesses that utilise workers who provide services through intermediary companies, such as personal service companies or agencies.
Under the new arrangements medium and large organisations in all sectors will be responsible for assessing an individual’s employment status and determining whether the rules apply. Contractors to whom the rules apply would then pay tax and NIC in a similar way as if they were an employee under PAYE. Current contractors working in the private sector will therefore have to determine whether this is likely to affect them.
On 7 January 2020 the Government announced a review into the new rules. The review will gather information from affected individuals and businesses, with the government saying it aims to address any concerns about how the IR35 rules will be implemented. The review is expected to conclude around February 2020.
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This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.