Last week HMRC set out their IR35 blueprint, so what does this mean for the UK’s Limited Company contractors? Patrick Gribben, Head of Client Services at Intouch Accounting gives his professional opinion on how contractors will be affected.
HMRC have described this consultation as ‘a policy paper and consultation document’, giving actions for businesses to take now, to prepare for the reform. This sends a clear message to the contracting community that IR35 will definitely be extended into the private sector. HMRC wants all parties involved in the supply chain to have clear understandings of their responsibilities and have strong processes and communication channels in place to meet them. Under the new rules, if they do not meet those responsibilities they will likely assume a tax risk, so there is no escaping the application of these enforced complex laws or the considerable administrative burdens which they’ll bring.
With the burden of risk spreading across the supply chain, recruiters and end hirers must understand their new obligations under IR35 to prepare for the level of risk they could be exposed to. They must also take steps to reassure their contract workforce that they’re prepared and that contractors will be assessed fairly.
What must be remembered is that the existing rules of IR35 will still apply, i.e.the way in which status is determined – whether you’re found inside or outside. It’s the responsibility for applying the rules (and the associated tax risk) which is changing. If as a contractor you’re currently outside of IR35, you will still be outside after April 2020. But if you’re currently unsure of your IR35 status, or think you may be ‘borderline’, there will be things you should be doing to protect your contractor status.
We would suggest that all contractors liaise with their end hirers to ensure they’re being fairly assessed and to consider any changes they can implement now, before the changes come into play next April.
As an Intouch client, please do contact your Personal Accountant if you have any questions or concerns about IR35. If you’re not currently an Intouch client, perhaps now’s the time to consider switching? Intouch’s core service includes unlimited IR35 advice, risk assessments and fee protection relating to HMRC inquiries. You’ll have a direct line to your own Personal Accountant, who’ll make sure you understand your options, make the right decisions and stay compliant.