HMRC looks set to bring in new tax rules: IR35 for private sector contractors.
The tax rules have already been introduced for contractors working in the public sector, and have netted £410m in income tax and national insurance contributions since they came into force in April last year.
It now seems clear that HMRC has the evidence it needs to push through the changes in the private sector.
“The rules, known as IR35, were introduced in the public sector as part of the government’s crackdown on tax avoidance,” says Richard Mathews, CEO here at Optimum, who heads up the tax advice team. “IR35 is designed to combat tax avoidance by workers supplying their services via an intermediary, such as a limited company, but who would be an employee if the intermediary was not used. Such workers are called ‘disguised employees’.
“This level of recovery of tax and national insurance contributions is likely to harden the government’s resolve to impose the same reforms on the private sector. All contractors and consultants working through their own personal service company should be aware changes appear inevitable.”
Speculation is rising that the reforms will be introduced in April next year, following an announcement in the November Budget.
Richard adds: “At present April 2019 is being touted as the date for roll out to the private sector, but even if that is delayed the changeover seems only a matter of time.”
The tax team at Optimum works extensively with contractors and consultants and is offering a free initial consultation for anybody concerned about IR35 for private sector contractors. Please get in touch with the team here at Optimum to talk about how we can help.
As a business owner we will work with you and take a proactive approach that will minimise the tax burden on your business while still being fully compliant with HMRC rules. With careful tax planning we can also help ensure your tax bills do not interrupt your cashflow.