Put simply, IR35 is the intended simplification of the off payroll working arrangements. For many who are currently self employed or contracting through their own limited company the IR35 rules have the potential to be a game changer in their working arrangements. The motivation for the push to formalise workers as employed has clearly come from a tax angle but the implications could be much broader for many.
If caught by IR35 you will be paying higher levels of deductions to HMRC, but the implications will be much wider
The IR35 tests have changed since they were enacted and are likely to continue to be modified. Cases continue to be fought in the courts and this Case Law will also change how workers are regarded for tax purposes. For some time now we have been reviewing cases with the following tests in mind:
- Supervision - does the 'employer' supervise you in your working practices?
- Direction - are you told what to do and how to do it?
- Control - can the 'employer' force you to do things in a certain way?
However, more recent cases have also valued other aspects as being relevant. To gain a clear picture of worker status, specialist advice is really required.
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2020 changes deferred to 2021
New IR35 rules mandating larger companies to employ their contractors were due to come into force in April 2020. Due to the COVID-19 crisis this has been pushed back to April 2021. However, we firmly expect the measures to come into force as planned.
Whilst smaller 'employers' are not caught by these changes, there is often a larger company in the supply chain who will insist on an employment relationship and as such many smaller companies are having to modify or lose contracts.
Companies contracting to public sector bodies were already caught by these rules so this only applies to non-public sector arrangements but we expect the impact on those affected to be significant.
If you contract individuals through their own limited companies or self-employed workers it is important that you are aware of the new rules and those which have been on force for sometime. We do not expect this issue to go away and those affected need to be proactive in dealing with the impact.
Why might I need Tax Investigation Cover?
Lovewell Blake Tax Investigation Cover will pay our professional fees for dealing with an HMRC investigation or enquiry.Our cover is market leading and there is no excess to pay. In the event of a tax investigation or enquiry we can handle everything including all correspondence with HMRC and even host meetings with the Inspector on your behalf.
Even if you have done nothing wrong it can take time to prove this to HMRC and deal with their letters and enquiries. Many of our clients value the peace of mind TIC provides. See our dedicated Tax Investigation Cover page for more information and to subscribe online.
Can you help with my pensions and tax planning?
Our tax advisory team have a broad range of expertise and can advise you on all aspects of planning and compliance. However, what sets Lovewell Blake apart is our own firm of Financial Advisers Lovewell Blake Financial Planning.
Our Financial Planning Consultants work seamlessly with our tax teams to provide a uniquely joined up and tailored service. From retirement planning to tax efficient investments and transactional advice we have the full range of expertise working together for you.
I am concerned about IR35 and the changes to the rules coming in 2021, can you help?
We have seen tightening of the IR35 regulations affecting off payroll working for a number of years. Changes which were due to be enacted in 2020 have been deferred for a year until April 2021. Whilst aimed at larger companies, we anticipate the impact to trickle down to contractors.
We have developed an IR35 hub where we consider in detail the potential impact of IR35, what you can do to prepare and how to check your status.