From April 2020, every medium and large private-sector firm in the UK will become responsible for setting the tax status of any contractor they use, as is the case in the public sector.
The rules will only apply to payments made by private-sector businesses or agencies for services provided on or after 6 April 2020, and no retrospective charges will apply.
Private-sector organisations and contractors had been fiercely opposed to the changes prior to the report being published.
Tax experts expect the changes to reduce a worker’s take-home income by as much as 25% as contractors operating through a limited company face paying thousands of pounds more in extra income tax and national insurance contributions.
The rules mean that contractors, such as IT or management consultants, who work through their own limited company but are technically employed by a third-party organisation, pay the correct amount of income tax in the same way as employees.
Previous Government estimates suggest the move could boost the public purse by up to £1.2 billion by 2023 as a result of people getting the rules right, and correctly paying tax as if they were employed.
If you wish to discuss the new rules please contact us on 020 7330 0000. We are holding a seminar regarding the new IR35 rules on 25 March. If you wish to join us please register here.