Big changes are on the horizon for IR35 and for contractors (or those considering a career in contracting), so now is the perfect time to understand what’s coming next year, and how to prepare yourself now.
In this blog, Neil Kellaway our Operations Manager gives a clear overview of what’s going to change.
Before we explore the changes that are coming, it’s important to understand how IR35 currently affects contractors.
IR35 guidance in the Public sector – If a contractor is currently working within the Public sector, it is up to their end-hirer to determine their IR35 status. Once the end-hirer has done so, it’s their job to let the ‘fee payer’ (usually the supplying agency) know whether the contract should be paid net or gross of tax.
As mandated by HMRC, all IR35 decisions should be conducted on a case-by-case basis. So whilst your contract is within the Public sector, it doesn’t automatically mean you’ll be found working inside IR35.
IR35 in the Private sector – If a contractor is currently working within the Private sector it’s up to them to determine their own IR35 status, and bear the tax risk should they get it wrong.
HMRC are active in carrying out IR35 investigations, so it’s worth ensuring you fully understand IR35 and have the support of an expert IR35 accountant who’s able to provide unlimited contract reviews and services. If HMRC do investigate you and consider your contract to be inside IR35 then you’ll be ‘deemed employed’, and you’ll have to pay more tax (plus HMRC could apply tax retrospectively).
Changes to IR35 come April 2021
From April 2021 all contracts, regardless of whether they’re Public or Private, will have their IR35 status determined by the end-hirer (ie. your client). So even if your contract is within the Private sector, it will no longer be your responsibility to determine your own IR35 status.
The associated tax risk of misidentifying your status will then also lie with your end-hirer, meaning no tax burden on you if they get it wrong. The IR35 rules are not changing, so if you are genuinely outside of IR35 now, you should continue to be so post- April 2021.
However, this shift in responsibility has got some end-hirers nervous about April 2021 and there are concerns that some may make moves towards deeming all contracts to be within IR35 to protect themselves from any associated tax risks. However, those end-hirers managing the change properly will reap the benefits of attracting the best talent, and the feeling is that others will fall into line after a short period of turbulence.
So how can you ensure your end-hirer has made the right decision on your contract post April 2021?
Whilst the end decision is out of your hands, there are steps you can take to make both yours and your end-hirers lives much easier. One of which is enlisting the services of a specialist Contractor Accountant who is an expert in IR35, and is able to support you on every future contract.
At Intouch we offer the following unique IR35 services to all of our contractor accounting clients at no extra cost:
- Unlimited IR35 and working practice reviews – to share with your end-hirer. Whilst their decision is final, we provide you with an easy-to-use report on your contract’s status and working practices to aid them in their decision. We can even offer legal support to end-hirers who struggle to apply the ‘reasonable care’ that HMRC expect from them.
- Switch between Umbrella and Limited – if you do find yourself inside IR35 but still want to complete the contract, then Intouch’s Flex solution is the answer. One of our contractor accountants will switch you over to our Umbrella for the duration of your contract, keep your Limited Company ticking over and up to date, then when you’re ready to switch back your Limited Company is waiting for you. All the while you’ll have the same unlimited support and guidance from your dedicated Personal Accountant. Find out more.
- IR35 specialist law firm support – here at Intouch we’re supported by Brookson Legal, the only SRA regulated law firm that focuses on IR35 for agencies and end-hirers. With their support we’re able to approach agencies and end-hirers, to help ensure the rules are properly applied and that the impact on contractors is mitigated.
More information on IR35
Looking for more support and information on IR35? Download our free guide now to fully understand all aspects of IR35, and answer all of your questions.
Ready to talk to us about our IR35 services and the other services we can offer you to support your career in contracting? Get in touch today or give us a call on 01202 375562.
This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.