When will new IR35 rules begin? Everything you need to know as IR35 changes loom
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The IR35 laws were introduced in 2000 in an effort to identify ‘disguised employees’ within business. IR35 legislation ensures off-payroll and on-payroll workers are taxed fairly and accordingly. In real terms, this means if a contractor is working under the exact same conditions as a contracted employee (effectively a ‘disguised employee’), IR35 rules ensure the contractor pays the same tax and National Insurance contributions as their employed counterpart.
What are the new rules?
The difference between now and the new rules will be who make the IR35 determination.
At present, contractors themselves are responsible for deeming their employment status and deciding whether or not they’re working outside IR35 rules.
When the new rules come into play, this determination will be down to the employing business to make.
The outcome and reasons behind the determination will need to be properly documented and communicated to the contractor prior to the work actually starting.
Who will be affected by the changes?
The IR35, thankfully, won’t apply to all businesses in the UK.
Small businesses are currently exempt from the changes alongside sole traders and PAYE agency workers.
Medium and large-sized businesses will, however, be impacted by the new legislation, especially if they are a firm who regularly engages with self-employed contractors operating under a Personal Service Company.
A range of contractors will likely be affected, including builders, IT technicians and engineers, with some experts warning this could deter businesses from taking on self-employed workers.
When will the new IR35 rules begin?
The changes will come into effect on April 6, 2021, and don’t appear to be postponed.
The new IR35 rules for the private sector were due to come into play in April 2020 but were inevitably delayed due to the COVID-19 pandemic.
Despite calls from various businesses to Chancellor Rishi Sunak to extend the delay for another year, that doesn’t seem to be happening.
The Chancellor, much to the dismay of contractors and hiring businesses, failed to mention anything regarding IR35 in the Budget on March 3.
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Speaking to Express.co.uk, partner at Mazars, Ian Goodwin said: “The noises out of the Government suggest strongly that no delay to the private sector IR35/Off-payroll changes will be announced.
“This means that it will go live from April 6 regardless of whether employers are ready or aware.
“There is still strong opposition to this change but many businesses have accepted this is not likely to be scrapped or further delayed.
“They are therefore preparing for the imminent change that has already been delayed by 12 months.”
Andy Hamman, Director in the Employers’ Advisory Group at Crowe, told Express.co.uk: “It was not expected that the Budget would make any mention of (or postpone) the change to legislation for off payroll workers in the private sector from April 6, 2021.
“There has been speculation of a further deferral, however, it is clear that the new rules will come into play as intended.
“Although not particularly welcome, many businesses have taken the delay from April 2020 as an opportunity to meet the new compliance conditions.
“It comes as no surprise that the planned changes will proceed unheeded, and the proposed changes to tighten the CIS compliance will go ahead as planned.”
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