STAGE 1 - THE WHAT, WHY & HOW OF IR35 & EMPLOYMENT STATUS
The off-payroll working rules for individuals who provide personal services via an intermediary will change for large and medium-sized businesses in the private sector from 6 April 2021. In a significant shift, these reforms will place the Employment Tax compliance burden on the agencies and companies that engage contractors who use Personal Service Companies (‘PSCs’), and are expected by many to increase operating costs and compliance risks.
The off payroll working rules, commonly referred to as IR35 after HMRC’s press release that announced their introduction, have a straightforward aim. The rules are intended to prevent individuals from reducing income tax and National Insurance Contribution (‘NIC’) liabilities, through what HMRC considers to be “disguised employment”, where an individual provides their services via a PSC, receiving payment in the form of dividends.
However, in certain circumstances determining whether the IR35 rules apply can be challenging. This article summarises how the IR35 regime currently operates, and the challenges surrounding those rules. It then discusses the reforms which will take effect in the private sector from April 2021. To put this in context, we begin with a brief survey of recent developments...
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