Update on the IR35 legislation

The intermediaries legislation, IR35 or the off-payroll rules. However you refer to it, this blog will help you identify whether you’re affected by the changes implemented last month.

What has changed and why?
Previously the government has struggled to ensure that enough contractors operate under the IR35 rules. The changes implemented aim to ensure that individuals who work through their own company pay equivalent taxes to if they were employed directly.

The changes made mean that the responsibility for deciding whether a contractor should report under IR35 is transferred to the public sector body, agency, or third party paying for them. Making the organisation responsible for deducting pay associated with employment taxes and National Insurance Contributions. In addition, it will also be optional for the agency or public sector body to take account of expenses when calculating tax due. Putting contractors in the same position as other employees whose employers can decide which expenses will be reimbursed.

Who is affected?
There are a number of organisations which may be affected by the new IR35 legislation. These include:

Making sure you are aware of your IR35 legislation
Whether you work within the IR35 status is determined based on the terms and working practices of individual contracts. If these are misunderstood or ignored and you are operating ‘outside’ of IR35 when you should be ‘inside’ you may be faced with a costly backlash.

If HMRC finds that monies earnt have not been taxed under the deemed salary you will incur substantial PAYE and NI bills alongside interest charges. In addition to this if HMRC feels that there have been deliberate decisions to operate ‘outside’ unlawfully there have been cases resulting in contractors being made bankrupt.

Understanding IR35
When it comes to changes in IR35 legislation it's always best to consult with an expert if you’re not sure whether or not the changes apply to you. Government changes can be complex, and it’s always better to be safe than sorry when it comes to HMRC. If you need any support please don’t hesitate to contact the Chichester Accountants on 01243 532490 or email info@thechichesteraccountants.com.

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