Despite opposition from contractors and employers alike, the new updates to IR35 came into effect in April 2017 for contractors working in the public sector.
IR35 affects contractors who do not meet HMRC’s definition of self-employment. The legislation was designed to stop contractors working as ‘disguised employees’, by taxing them at a rate similar to employment. Prior to the IR35 being created, the number of companies working via their own limited companies was rising at a rapid rate. Limited company owners enjoy a number of benefits which are not available to permanent staff. The government believed that many limited company professionals were in fact ‘disguised employees’ who provided services to their clients in the same way as normal employees, and not in the manner of typical ‘self-employed’ people who used their own limited companies. As a result the Intermediaries Legislation was created. If you are selected for a HMRC IR35 compliance check, the wording of your contract and the way you actually carry out the contract will be examined to determine whether you are ‘employed’ or ‘self-employed’ for tax purposes.
Since the IR35 came in to effect in April 2017, contractors suffer the most with an average 13% income drop. There has also been a backlash from contractors in the public sector, many of whom have stopped working, placing projects in jeopardy in the process. There has also been a sharp rise in non-compliance with an increased uptake in non-compliant loan schemes amongst contractors.
In November 2017, the government used the autumn budget to confirm plans for a consultation on extending the IR35 tax avoidance reforms to the private sector, despite fierce opposition. The consultation process will last up until summer 2018, confirming suspicions that IR35 in the private sector will not experience changes until 2019 at the earliest. Although not likely to happen soon, contractors in the private sector would be advised to plan as if the public sector rules will apply to them in the near future.
If you are a contractor and worried about how IR35 will affect you, then TCP Solutions can help you with this. When employed by TCP Solutions, you as the contractor don’t need to take on any responsibilities such as ensuring accounts and tax returns are submitted on time and the correct amount of tax is paid, as this will be done by TCP Solutions. As an employee of TCP you will also receive paid holiday and sick pay, benefits contractors are not entitled to when self-employed.
If you do not comply with the IR35 rules you will be charged a hefty fine. TCP Solutions operates across Europe and fully indemnifies all parties (client and employee) against any risk or liability that can arise should anything go wrong with the payroll or should the employment not be setup correctly. Would you like to know more? Please contact Ben Paulo (Business Development Executive) on +44 (0) 208 996 0883 or send us a message via our contact page.