OFF PAYROLL WORKERS AND IR35
Mondays budget posed new challenges for off payroll workers from April 2020. As a result of changes in rules, ‘off payroll’ workers will be paying more tax.
Consequently, this move replicates the recent changes made to contractors and freelance workers rules in the public sector.
Essentially, the responsibility of deciding whether to deduct tax and national insurance from workers will fall on to the employer instead of the worker.
CONTRACTORS AND IR35 BACKGROUND
IR35 was first introduced in 2000. In order to clamp down on single person limited companies providing professional services to clients whilst remaining as a traditional employee.
During an IR 35 check HMRC will review different factors to determine whether you are employed or self employed for tax purposes.
However, the main factors will include
- Control – is the worker under supervision?
- Substitution – can the worker provide a substitute if they are unavailable?
- Mutual Obligation – is there an expectation of further work once the current work expires?
In April 2017 HMRC introduced the ‘off payroll working’ rules for public sector bodies. As a result, a contractors IR35 status was to be determined by the public sector organisation and not the contractor itself.
Most importantly, it is this change which will now be extended to the private sector from April 2020.
For the contractor
- Consider and umbrella company and pay standard tax and National insurance on your income
- Review your IR35 contract – have your contract reviewed by a specialist to ensure it is compliant
- IR35 Insurance – take out tax investigation insurance to cover costs of an inquiry and even tax penalties or extra tax charges
For the employer
- By April 2020 it will be your responsibility to ensure the status of your workers. This should be reviewed by a specialist.
Whether you are a contractor or employer get in touch with us today to discuss your responsibilities!