THE IMPACT OF IR35 REFORMS

IR35 changes are coming… James Poyser highlights what you need to know

- James Poyser

In 2000 a new piece of tax law was introduced called IR35. It was designed to stop tax avoidance and prevent companies from hiring someone through a limited company, rather than employing them directly and ensuring they pay the appropriate National Insurance and income tax.

On 6 April 2020, new IR35 reforms come into effect in the private sector. From then onwards the onus will be on medium/ large companies to ensure any contractors who provide services to them through a limited company or personal services organisation (PSC) are paying the correct amount of tax.

Previously, it was down to the contractors to determine their status as ‘outside IR35’ (so not a disguised employee ie they pay themselves a salary, dividends and pay corporation tax from profit), or ‘inside IR35’ and liable for a client’s employment tax.

DO I NEED LEGAL ADVICE?

If you employ hundreds of contractors or freelancers to deliver work on a shortterm contract, there is a huge amount of work in determining whether every one of them is working inside or outside IR35.