IR35 is tax legislation that HMRC introduced in 2000 to combat tax avoidance. It is designed to determine whether a temporary worker should be classed as employed or self-employed. If a worker is being paid on a self-employed basis but is found to be operating in what is considered an employed basis… They are ‘caught’ by this legislation and therefore will need to be paid on an employed tax basis.
Just like the Public Sector in 2017, HMRC are shifting the liability. It will now be the responsibility of the Agency and/or the End Client to ensure the worker’s status is correctly identified. If found to be incorrect, HMRC can demand back-tax from the Agency/End Client. If an Agency/Client are paying many Self-Employed/PSC workers who are subsequently ‘caught’ by IR35, back-tax bills could be significant.
Determining IR35 correctly can be very complex as many things need to be considered. One starting point is asking questions to confirm the nature of the work...
If the answer is mainly NO to the above, action is required!
“Small Companies” will be exempt from the change. 2 of the following must apply: