IR35 changes kick in next month – what HMRC’s new rules could mean for you

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IR35, formally known as off-payroll working rules, are stipulations which ensure contractors who are working for companies are paying the correct amount of tax. The system is utilised by HMRC to evaluate and check if a contractor is genuine rather than being used as a ‘disguised employee’ for the purposes of tax paying. IR35 rule changes, however, are set to come into force from next month onwards, potentially impacting hundreds of thousands of people.

New rules mean private sector firms will be given the ability to make up their own minds about a contractor’s IR35 status, rather than the current arrangement which lets contractors decide.

The tax payment liability will also transfer from the contractor to a fee-payer, which in most circumstances will be the employer.

There has been a certain degree of pushback to the changes, and some believe they should be delayed further given the unfolding pandemic.

However, as IR35 changes are set to go ahead, many will wish to prepare themselves for what these could mean.

The organisation Techfynder has broken down what IR35 changes could mean for contractors, and how these alterations may be navigated.

Firstly, individuals who are working as contractors after April 6, 2021, have been urged to full understand their IR35 status.

Individuals who believe they have been incorrectly placed inside IR35 when working on a self-employed basis may be able to challenge this decision.

The Government has offered further guidance into understanding off-payroll working rules, and challenges can also be officially submitted through this channel.

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HMRC also has a tool known as “check employment status for tax” which can help Britons find out if they should be classified as employed or self-employed for tax purposes.

Those to whom IR35 does apply, but who have been working on a self-employed basis outside IR35 in the past, will need to take specific action.

In most circumstances, these individuals may be required to pay back any missing tax plus interest which has accrued and penalties due.

The Government has the power to investigate Britons as far back as six years ago, which means getting one’s financial situation in order will be key.

If someone is found to be non-compliant, this could have major financial consequences for them, and so being proactive is important.

Many people are worried new IR35 changes could mean a blanket ban on contractors, by as Techfynder has highlighted this is not the case.

HMRC issued updated guidance in February which stated blanket bans on contractor hires are not permitted.

This means contractors do not have to worry about being placed into the IR35 bracket for employer ease.

It is, however, worth noting that businesses will always need experts to provide skills in the short-term, regardless of the IR35 legislation.

The organisation has said it has seen more demand from businesses for contract roles than ever before recently.

But for new contractors who need to deal with the IR35 change, there may be some action which can be taken before the alteration occurs. 

Techfynder has said those starting work on a self-employed basis for the first time and planning to set up as a company contractor should get in touch with an expert.

It is likely these experts will be able to provide in-depth insight on the matter and the best ways to proceed to avoid unnecessary costs later down the line. 

Off-payroll working rules have been implemented since 2000 to provide guidance and fairness for self-employed and contracted people.

The original Government statement said an extension of the 2017 reforms would roll out by April 2020.

However, the impacts of the COVID-19 pandemic have meant delays for the process.

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