IR35 – forgotten but not gone?

23 November 2020

IR35 - are you ready for April 2021?

This time last year if you picked up a newspaper there was a good chance the front page would have been about Brexit. And whilst a global pandemic has changed that, Brexit has still come back to the fore, a reminder that other challenges we face are still here, Covid or no Covid.

Well, we have a similar situation in the world of Employment tax. Twelve months ago, the hot topic of conversation was the extension into the private sector of the new IR35 rules that already apply in the public sector.

The new rules require medium and large-sized businesses to review engagements they have with individuals operating through their own limited companies. The end client must consider whether the individual would have been an employee if they provided their services direct.  If they would, the client must operate PAYE on payments it makes to the limited company.

Lobbying from several groups prompted a limited review of the changes but the government was set on introducing them from April 2020. Then Covid caused a major shift in priorities that meant the new rules were postponed to April 2021.

The rules have not gone away. The legislation has now passed into law and the government clearly still sees changes to the distinction between employment and other forms of engagement as a priority. When he introduced the Covid Self-Employment Income Support Scheme, the Chancellor said this support would mean the National Insurance advantages of not being an employee would, in his words, be “harder to justify” and “we must all pay equally in future”.

It is prudent to assume the new rules will come into effect as planned from April next year. And it is sensible for businesses to review their arrangements now with workers engaged through limited companies, so they can make sure appropriate processes are in place regarding PAYE and NIC.

Find out more

Contact one of our specialists below to start or to refresh your IR35 planning process today!

Richard Maitland, Partner 
E: richard.maitland@mhllp.co.uk
T: 07711 373 584
Gordon Thrower, Senior Employment Tax Manager 
E: gordon.thrower@mhllp.co.uk
T: 020 7429 4137

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