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IR35, new changes from on 6 April 2020

IR35 concept image

News relating to IR35 abound. Read on to see if the latest changes, taking place on 6 April 2020, will impact you.

Back in 2017, the onus to prove one’s self-employed status shifted from the contractors to the company that hires them across the public sector. This April, private companies (medium to large organisations) must also take on the responsibility to determine a contractor’s IR35 status.

While the law will go ahead, the government has announced a 12-month grace period as it acknowledged that ‘shifting responsibility for determining employment status is a major change for employers and other organisations that use contractors and contingent labour’, according to the report published by HMRC.

What does it mean?

From 6 April, medium and large companies must determine the tax status of the freelancers and contractors they employ directly or via an agency. This means companies must set the tax status and deduct income tax and National Insurance contributions from the fees paid.

Most contractors aren’t happy with this arrangement because they can’t set their tax status (but they could before 6 April). Plus they now have to pay tax and National Insurance (like an ordinary employee) but with no access to benefits like paid holiday or sick pay.

It must be noted that IR35 does not apply to small businesses. A company is considered small if two or more of the following conditions are met:

  • Annual turnover is less than £10.2 million
  • Balance sheet total is less than £5.1 million
  • Has less than 50 employees

IR35 is a highly controversial subject and many organisations and freelancers already expected it will cause issues. If you want to know about the new IR35 changes and how they affect your company, give us a call on 020 8108 0090.