The Public Sector IR35 changes, which came into effect on 6th April 2017, caused a storm amongst businesses and contractors alike, with many worrying they would be negatively impacted as a result of the changes.
But what exactly do the changes mean for businesses and contractors operating in the Public Sector? And should you change your approach to counteract this change in legislation?
IR35 is a piece of legislation designed to correctly determine if a contractor operating through a limited company is a ‘true contractor’ or a disguised employee for tax purposes.
Originally, IR35 came into force in April 2000 and was designed to combat a growing trend in which organisations engaged with workers on a self-employed basis via their own limited company with the intent of minimising tax liabilities for both the business and contractor.
Upon the introduction of IR35, HMRC laid down specific rules for limited companies regarding what constituted a disguised employee as opposed to a self-employed worker, implementing a series of tests of employment to do so.
Traditionally, the responsibility for ensuring IR35 compliance fell upon the contractor, who consulted with their accountant to establish whether they fell inside IR35 or not. The changes which were implemented, however, altered this, making it the responsibility of the Public sector organisation engaging the contractor.
With responsibility now falling to the engager, it has been reported that Public sector organisations are placing blanket inside IR35 decisions across their contractor workforce. This may have resulted in contracts that would otherwise be considered outside IR35 to now have unlawful deductions of tax and national insurance from their agreed rate of pay.
As a result of this, many contractors are now concerned that this move may negatively impact their earnings and are worrying more than ever about their IR35 status.
Despite this, if you are a contractor you do not need to be overly concerned with the changes. If you have already been operating compliantly with IR35 legislation this alteration shouldn’t impact your earnings. And if you’re unsure about your IR35 status you can check using HMRC’s tool. However, in recent tribunals the HMRC tool has come under scrutiny so we recommend speaking with a member of the Exchequer Accountancy team to get expert advice on determining your status.
The team at Exchequer Accountancy know everything you need to know about IR35. Let our expert team of IR35 accountants worry about your status, so you can focus on getting more work.
Call us on 01244 500190 or arrange a callback from one of our team to discover how we could help you.