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An Update: Coronavirus and IR35

In response to the Coronavirus pandemic, the UK Government last week announced that the nationwide implementation of IR35 will be delayed.

The controversial new legislation was set to become law in April 2020, a move by the Treasury to collect additional Income Tax and National Insurance payments from independent contractors deemed to be an employee of a company in all but name.

Revised plans, focused on helping businesses and individuals through the uncertain economic climate caused by the Covid-19 outbreak, will see the roll-out of IR35 postponed until April 2021.

What will the new rule mean?

If you are self-employed but operate as a registered company, and all or most of your income comes from one client, it is likely that your working practices and relationship with that client will be examined by Her Majesty’s Revenue and Customs (HMRC).

Where HMRC determines that these practices are not IR35 compliant, contractors may be expected to pay Income Tax and National Insurance contributions on their earnings from the client as they would if the income was gained through standard employment.

How long do I have to become compliant?

The good news is that you have plenty of time to make changes in order to avoid financial sanctions.

A review of IR35 legislation released earlier this month confirmed that the Treasury will take a ‘light-touch’ approach, meaning that penalties will not be imposed during the first year of roll-out unless there is a deliberate effort not to comply.

Originally ear-marked for 2020, the same rules will apply to the 2021 implementation, meaning freelancers now have a far greater time-frame to become compliant.

On a cautionary note, new IR35 legislation has shifted the responsibility for compliance very much to the client. This means that companies will quickly become more stringent in their attempts to comply and that existing contracts are likely to be reviewed sooner rather than later.

Regardless of the delays to IR35 roll-out, the best advice for contractors is to review working practices immediately, in order to avoid loss of business in the short term and sanctions in the years ahead.

What steps can I take?

Ease Accounting recently published some handy guidance that outlines the changes you can make in order to become IR35 compliant, including tips on how to manage your relationship with a client. Follow this link to find out more.

In the meantime, remember that under current law your limited company may still be entitled to a 5% tax allowance that covers essential business expenses, and that you can apply today.

To find out more, please request a call back and a member of our friendly and knowledgeable team will get in touch to discuss your options.


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