Are you prepared for the new IR35 tax changes due next month?

IR35 legislation has been a hot topic for a number of years for the self-employed. Whilst changes introduced to the public sector in 2017 saw a clampdown on those paying incorrect tax, new rules affecting the private sector are set to come into force next month (from April 2021).

Many are unaware of the changes, with a study from EY TaxChat finding over one third of self-employed professionals did not know of the soon-to-be imposed private sector IR35 regulations. Here we offer an essential guide to IR35 and more importantly reveal what the new rules could mean for you.

What exactly is IR35?

Often referred to as ‘off-payroll working rules’, IR35 regulations were introduced to ensure those that contract through an intermediary (such as a Personal Services Company or PSC) are paying the correct amount of National Insurance.

By claiming to be self-employed, thousands of people have been able to pay lower National Insurance Contributions (NICs), with the companies they contract with also not paying the correct level of NICs.

Does my work fall inside IR35?

It is important to note that professionals who are genuine freelancers or self-employed workers will not be caught out by IR35 regulations. Those that will be affected are professionals who would be considered an employee of the company they contract for if the intermediary they use was not in place.

If you have your working hours or work location dictated by the company, or the company you work for is obliged to give you more work once your initial task has been finished, you may fall inside IR35. If you have a substitute clause within your work contract and that substitute is managed by you and not the company, you may be outside of the regulations.

Why are new regulations being introduced?

The IR35 regulations due to be introduced next month are simply an extension to the rules that already affect the public sector. From 6th April 2021, all medium to large sized companies within the private sector will have to follow IR35 regulations.

The changes are expected to affect approximately 170,000 self-employed individuals, as well as many private sector companies and recruitment businesses.

There are many off-payroll working resources available for clients, contractors and tax agents set to be affected by the IR35 rules. You can also contact us direct for further advice on how the regulations may apply to you. Please call 0191 251 7599 or email to get in touch with our team.