On 6 April the rules for IR35 changed and with the threat of a hefty fine should you get it wrong, it is almost certainly a good thing to make yourself aware of these changes.
What is IR35?
Before the IR35 legislation came into effect in 2000 there were an increasing number of people working through their own limited company. As a director of their company, they would enjoy perks that people in full-time employment would not be eligible for. The main reason for doing this was that no National Insurance Contributions (NICs) are payable on company dividends. Whereas, full-time staff has to pay PAYE and NICs.
The government believed that they were losing a lot of revenue through this system so introduced IR35. It was introduced to tackle cases of disguised employment. If anyone was caught foul of this they would be liable to pay the PAYE and NICs on their income.
What are the changes?
Up until now, it has been the responsibility of the worker to ensure that they were compliant. The change will only apply to work that is carried out within the public sector. The new rule will see the responsibility shift to the public sector client to determine whether their workers fall under IR35 or not. Failure to comply will result in hefty fines.
Will this affect me?
HMRC has created an IR35 Employment status tool that was launched last month (March 2017) to help workers, clients and agents identify if someone will be caught out by IR35. With mixed reports of accuracy on results, HMRC has said it will stand by the results of the tool assuming that all inputted data is correct.
What can I do?
If you think that this change may or may not affect you please get in touch with your accountant as soon as possible. Here at Ormerod Rutter, we have experts with years of experience in the industry. We also offer tax investigation insurance which covers any costs incurred should you have a tax investigation.
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