Originally written by Timothy Adler on Small Business
With the IR35 rules being reformed within the private sector from April 2020 (essentially mirroring the changes introduced to the public sector back in April 2017), there is a great deal of uncertainty, not only about how the rules will work, but also how employment businesses will practically operate the new legislation.
IR35 puts the onus for deciding whether a freelance contractor is truly freelance or a full-time employee on the recruitment agency. HMRC is on the lookout for what it considers “disguised employment”.
The controversy is that contractors who are considered to fall within IR35 are taxed as an employee, often at the higher rate of income tax, but do not get benefits like paid annual leave or sick pay.
Additionally, employment businesses will be responsible for deducting income tax and employee’s national insurance contributions (NICs) from fees paid, regardless of whether their client pays its bill.
With less than 12 months to go until these changes come into force, it is important that employment businesses who engage contractors through personal service companies (PSCs) understand what practical steps they can take now to prepare in advance.
How to prepare in advance:
Contact current PSCs
Employment businesses should liaise with