Chancellor to go easy in IR35 shake up

Chancellor to go easy on businesses and freelancers in IR35 shakeup

From 6th April 2020, responsibility for determining the tax status of freelancers will fall on the paying company, not the freelancer, in a huge shake up of the rules around tax status. The new rules apply to all fee-paying medium and large companies in the private sector and as a guide, a private company requiring an audit is large/medium, so affected by the new rules.

Chancellor Rishi Sunak announced recently that businesses and freelancers would not be punished with penalties for any errors unless they were deliberate mistakes. These changes are expected to have a significant impact on the contractor industry, with 70% of 350 organisations in a recent poll saying they would no longer be willing to use contractors.

The area is covered by the IR35 rules and is aimed at ensuring an individual who operates like an employee is taxed as an employee, not as self-employed. The fee-paying company will be responsible for declaring the individual’s tax status and deducting the correct amount of tax & NI, where applicable. It will also need to send information about the payments to HMRC under Real Time Information.

VAT

Where VAT has already been charged on an invoice, this needs to be adjusted for so that it is not charged or accounted for incorrectly.

Action to take now

The impact of these changes is likely to be significant and wide-reaching, affecting many businesses and companies who currently pay individuals in this way.

We are urging fee-paying companies to review the arrangements they have in place with workers and ensure they are prepared for the changes in April. Issues such as adequate software, an understanding of PAYE and NIC calculations and VAT should be considered. This will be high on HMRC‘s radar and getting it right from the start is essential.

We can advise on this area and all related employer & employee tax issues. Please contact [email protected] or [email protected] or call 01527 558539 to discuss your requirements and queries.

IR35

IR35