The IR35 ‘off-payroll’ rules will be extended to the private sector on 6th April 2021, directly affecting a large number of contractors. What exactly does this mean, and what should contractors and clients do to comply with the new legislation?
The Intermediaries Legislation was introduced in 2000 to tackle 'disguised employment', where an individual uses a limited company to carry out professional services, but works in a manner more like an 'employee'. Your take home pay will be significantly lower if your contracts fall within its scope.
The 'off-payroll' addition to the existing IR35 rules was rolled out across the public sector in April 2017. Since April 2021 the rules also apply to the majority of private sector businesses.
The 'Off Payroll' rules mean that clients (not contractors) are responsible for determining the employment status of contractors. Prior to this, workers themselves were responsible for this determination.
Here are some of our most-read articles:
- April 2021 Private sector IR35 reform - what happens now?
- What clients can do to prepare in advance of April 2021.
- What contractors can do to mitigate against the IR35 changes
- IR35 off-payroll changes - our essential FAQs
- IR35 Calculator - how much will it cost you if you are caught?
Get started with our IR35 guides
With the private sector off-payroll changes set to go ahead in April 2020, some ‘outside IR35’ contractors may be forced to work ‘inside IR35’ if their clients are reluctant to take on the potential risks of making incorrect employment status decisions – at least for the time being.
The Treasury has announced a review into the ‘off payroll’ (IR35) rules, seemingly aimed at making the private sector rollout as smooth as possible, rather than as a precursor to making much-needed changes to the underlying legislation.
A number of high profile clients will stop engaging limited company contractors in 2020 due to the private sector off-payroll changes. What should you do if you are affected? We ask a well-known IR35 expert.
When end-clients determine the IR35 status of contractors in the private sector from April 2021 onwards, they are tasked with taking ‘reasonable care’ when making employment status decisions.
Barclays has told its contract workforce that it will no longer engage contractors who operate via limited companies, as a consequence of the forthcoming private sector IR35 off-payroll changes next April. Other firms are taking similar measures.
If you decide to cease trading via your limited company following the private sector IR35 changes in April 2020, you should take great care when chosing the best way to exit, as well as the alternative ways to operate as a contractor.
Around 1,500 GlaxoSmithKline contractors have been sent identical letters from HMRC, accusing them of being ‘disguised employees’ – and therefore subject to the IR35 rules.
If your contract work is caught by IR35, your tax bill will rise considerably. Here, we use our IR35 calculator to work out the financial impact on contractors earning between £250 and £1000 per day.
If you are caught by the off-payroll IR35 rules, you may decide that there is no point keeping your limited company active. However, this isn’t necessarily the case, as a leading accountant explains.