The changes, their implications and your options explained
The delay to off-payroll working reform in the private sector means contractors will carry on setting their IR35 status until 6th April 2021.
Chief Secretary to the Treasury, Stephen Barclay, announced the surprise news in thelast week, which he said was to “help businesses and individuals” in response to the Coronavirus pandemic. By postponing controversial changes to IR35 at a time of economic uncertainty, contractors, recruitment agencies and private sector businesses collectively breathed a huge sigh of relief.
Having now spent the best part of a week digesting the Government’s shock U-turn, we’ve examined what it means for you, as a freelancer or contractor.
What’s been announced?
We’ll start from the top. On 6th April, reform to the IR35 legislation would have meant contractors engaged by medium and large companies would no longer be able to set their IR35 status – in other words, decide if the service they provide to clients resembles employment or self-employment.
Instead, contractors’ clients were readying themselves to assess IR35, with the liability set to be passed from the contractor to the business in charge of paying the worker. The challenges created by the Coronavirus crisis led the Government to push these changes back a year, which is considered good news for everyone involved.
Do I need to do anything?
It’s important that you continue to make sure you’re working under the correct IR35 status – so in that respect, nothing has changed and nothing will do until next April. As has always been the case in the private sector, you have the power to decide if the service you provide your client is a contract of service or a contract for services, which will then dictate how much tax you pay.
So to reiterate, IR35 compliance should be your top priority.
Can I move back outside IR35?
If you’ve been deemed inside IR35 by your client, you don’t have to continue working inside the rules as an employee for tax purposes. Although, if you’re keen to work outside IR35 once again, to be on the safe side you should consider having your contract reviewed by an expert.
Through our partner, Qdos Contractor, we offer a range of leading IR35 solutions, including IR35 status reviews and IR35 insurance.
What if I work via an umbrella?
If you started working through an umbrella company or became an employee of a client due to incoming reform, you’ll need to chat to your engager about whether you can start providing your services through your Personal Service Company again. This is because a contractor will have agreed a different contract to an umbrella worker, for example.
Have public sector changes been reversed?
No. The announcement concerned the private sector only. IR35 reform initially landed in the public sector in 2017 and will remain in place. So if you’re engaged by a public sector organisation it will be your client who continues to decide your tax status, with your fee-payer carrying the liability.
With over 20 years’ experience in supporting contractors, QAccounting is one of the UK’s longest serving contractor accountants. Offering leading accountancy services, including IR35 contract reviews through our partner, Qdos Contractor, we are rated 9/10 by contractors. To learn more about our IR35 solutions and trusted accountancy packages, please arrange a callback.
Further Economic Support
On Sunday 31st October 2020 the Government announced a number of updates to existing economic support measures. The full details of these measures are reported HERE (https://www.gov.uk/government/news/furlough-scheme-extended-and-further-economic-support-announced ).
Updates to the Job Support Scheme
The Government has published detailed information about the scheme HERE (https://www.gov.uk/government/publications/the-job-support-scheme/the-job-support-scheme )
Accounting for Limited Company Property Investments
It can be a complex decision for clients when it comes to determining how best to utilise existing Contractor Limited Company funds in a Property Investment Company