What is IR35?
IR35 is a word used to describe tax legislation designed to combat the problem of deemed employment and perceived tax avoidance by some workers – and the firms hiring them – who are supplying their services to clients via an intermediary. This could be via a limited company – rather than through an employment contract.
How will IR35 affect private sector contractors?
Since 2017 we have seen how IR35 affected contractors in the public sector. Many moved to the private sector in order to escape it. Add to that a less than certain employment market and the global pandemic – and options become fewer.
We believe at this stage HMRC will need as much tax revenue as possible, in order to support some of the activity that has taken place during the pandemic. We don’t believe firms or contractors will be able to avoid IR35 and it will happen on the 6 April 2021.
We believe emphasis will be on working practice and not just the actual contractual document between the firm and the contractors – unless one matches the other then a review of the status determination will be triggered.
Unless reasonable care and evidence can be produced to support a status determination then HMRC is at liberty to investigate status determination decisions and look retrospectively back to when the decision was made. This might mean that what you’re delivering against in May 2021 could possibly be reviewed years later if a discrepancy is spotted or evidence is missing to support a determination. Therefore it’s vital you make sure your client is using appropriate process, and has thorough knowledge of what is required.
If there is any doubt then we can help.
What are the benefits of being a contractor?
The ability to work with a wide variety of clients is attractive; typically doing a similar role but at different locations and with different challenges. Add to this that you don’t need to necessarily embed yourself into the politics and culture of a company, you’re there to perform a skilled task as an SME for a period of time and then move on. Operating as an intermediary into the client organisation comes with the benefits of your accountant enabling you to be as tax efficient as possible.
Will IR35 be the end contractor market?
There will always be a need for capable highly-skilled professionals who can fill tactical gaps. However, the market may shrink over time and not everyone will be able to find the kinds of contracts that are available.
How can we help you?
Get in touch with us and let us help you decide how best to work. We also offer contractor referral fees of £150 for every contractor that successfully engages with us.