The new year started with a bang this January, following the announcement of a long-awaited government review into the proposed IR35 reforms. However, the announcement wasn’t as rosy as expected, with leading industry figures labelling the review “meaningless”, “disappointing” and “lip-service”. What’s happened, and what does it mean for you?
IR35 & April’s changes
If you’re not fully up-to-speed, IR35 is an anti-tax-avoidance regulation, applicable to contractors and freelancers who do not fall within HMRC’s definition of “self-employed”. Up until spring, individuals working for private sector businesses are responsible for determining their tax status. However, in April 2020, this changes. Medium and private sector businesses will join the public sector, becoming responsible for assessing the IR35 status of any freelancers or contractors they engage; making the appropriate deductions.
April’s reforms have been subject to much scrutiny, with businesses estimating a 14 per cent increase to their contractor costs and self-employed workers fearing loss of the tax freedom they have so far enjoyed.
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The review into IR35
In response to these widely-held concerns, the Government has announced a review into the implementation of the new rules.
“We recognise that concerns have been raised about the forthcoming reforms to the off-payroll working rules.
“The purpose of this consultation is to make sure that the implementation of these changes in April is as smooth as possible.”
Jesse Norman, Finance Secretary to the Treasury.
However, this recently announced review has been met with significant backlash. There is no suggestion that the review committee (which is not independently chaired) will look beyond the implementation of the reforms, into the suitability of IR35 as a whole. In addition, with fewer than three months until the reforms come into force, there is no time for a full review and little time to implement any changes.
What the IR35 review means for you
It’s been made clear that this review will not delay the implementation of IR35; therefore, our advice to anyone affected by the changes in April remains the same: take action now.
We recommend that you carry on preparing for the IR35 reforms by:
- Taking time to understand IR35, your responsibilities, and how it affects your supply chain.
- Auditing your current contracts to highlight any that may fall within IR35.
- Taking appropriate action for any contracts that do fall within IR35.
For those not falling into IR35, a separate review into how self-employed workers can be better supported is also being launched. Watch our blog for the latest updates on how this could affect you.
IR35 is a complex piece of legislation – delaying your action until after the review will leave you little time to understand your position and ensure compliance. Don’t get caught out.
If you’re unclear about your current arrangements, unsure about best practice, or are struggling to understand your responsibilities, then get in touch with one of our IR35 specialists today.