Originally written by Timothy Adler on Small Business
The Government has voted through IR35 reform, which will bring millions of freelancers and contractors into pay-as-you-earn from April 2021.
IR35 puts the onus on employers to decide whether freelance contractors should pay national insurance will take effect from April 21 2021.
Contractors argue that although they will be taxed like regular PAYE employees, they will have none of the benefits of full-time staff, being both still on short-term contracts with no paid holiday.
>See also: Taxman will not fine you for getting things wrong with IR35 within first year
What is IR35 and how does it affect me?
Currently, contractors assess their own tax status, but impending reforms coming into force from April 6 2021 will shift this responsibility to hiring businesses.
The Government has proposed the changes to contracting tax rules in the private sector to combat what it calls “disguised employment”, where contractors do essentially the same work as employees but play less tax and reduced national insurance contributions.
Currently freelance contractors, one-man-band limited companies who work on projects for companies, pay corporation tax at 20 per cent instead of higher PAYE rates, while employers duck national insurance contributions. The Treasury sees both freelancers and employers as
Tag Archive for IR35
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IR35 freelance tax changes will go ahead in April 2021 – are you ready?
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
The Government has voted through IR35 reform, which will bring millions of freelancers and contractors into pay-as-you-earn from April 2021.
IR35 puts the onus on employers to decide whether freelance contractors should pay national insurance will take effect from April 21 2021.
Contractors argue that although they will be taxed like regular PAYE employees, they will have none of the benefits of full-time staff, being both still on short-term contracts with no paid holiday.
>See also: Taxman will not fine you for getting things wrong with IR35 within first year
What is IR35 and how does it affect me?
Currently, contractors assess their own tax status, but impending reforms coming into force from April 6 2021 will shift this responsibility to hiring businesses.
The Government has proposed the changes to contracting tax rules in the private sector to combat what it calls “disguised employment”, where contractors do essentially the same work as employees but play less tax and reduced national insurance contributions.
Currently freelance contractors, one-man-band limited companies who work on projects for companies, pay corporation tax at 20 per cent instead of higher PAYE rates, while employers duck national insurance contributions. The Treasury sees both freelancers and employers as
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Government announces delay of IR35 reforms until April 2021
by Anna Jordan • • 0 Comments
Originally written by Anna Jordan on Small Business
The government has decided to delay the incoming IR35 rules due to the coronavirus pandemic.
Chief treasury secretary, Steve Barclay, said that the reforms will be pushed back to 6 April 2021. The move comes among a raft of announcements supporting small businesses last night (17 March).
However, Barclay stressed that it is “a deferral, not a cancellation, and the government remains committed to reintroducing this policy”.
Relieved but still frustrated
Business experts have welcomed the news but are unhappy that the government intends to plough ahead in 2021 without further consultation.
Qdos CEO, Seb Maley, commented:
“The government has seen sense and made the right call in these unique circumstances. Given the economic challenges that lie ahead of the UK, now certainly would not have been the right time to roll out needless tax changes that endanger hundreds of thousands of contractors’ livelihoods.
“It does give private sector firms vital time to prepare for reform, which can only be a good thing for contractors. What matters now is that businesses use this time wisely.”
Claire Brook, employment law partner at Aaron & Partners, thinks the announcement is overdue:
“Although this will come as welcome news to a huge number of employers,
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Taxman will not fine you for getting things wrong with IR35 within first year
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
The government has confirmed those affected by IR35 tax changes, potentially bringing hundreds of thousands of freelancers within PAYE, will not be fined if they get things wrong in its first year.
Unless, that is, the taxman finds evidence of deliberate non-compliance with the controversial new IR35 rules.
This soft-landing period will only last until April 2021.
The Treasury has published the findings of its review into IR35 off-payroll working rules, due to come into force next month.
As expected, there will be no delay to the implementation to IR35, but the key changes are:
Customers (both employers and freelance contractors) will not have to pay penalties for inaccuracies relating to the off-payroll working rules in the first 12 months unless there is evidence of deliberate non-compliance
HMRC will amend the legislation to exclude wholly overseas organisations with no UK presence
The government will have a legal right to force clients to respond to a request for information about their size from an agency or worker
Brian Palmer, AAT tax policy adviser said: “This means that if employers or [freelance] contractors have taken reasonable steps to comply but get something wrong, HMRC will not be pursuing them with fines and penalties.”
>See
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Rishi Sunak blinks, says HMRC will ‘go soft’ on IR35 changes in year one
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Chancellor Rishi Sunak says the taxman will not be “heavy handed” when IR35 changes come into effect on 6 April, potentially bringing 230,000 sole traders within PAYE.
Answering questions in Birmingham on Saturday night, the new chancellor sought to reassure both companies and freelance contractors, saying the controversial policy will have a soft landing – at least in year one.
HMRC is keen to bring freelance contractors within PAYE in order to tackle what it calls “disguised employment”. Currently freelance contractors, one-man-band limited companies who work on projects for companies, pay corporation tax at 20 per cent instead of higher PAYE rates, while employers duck national insurance contributions. The Treasury sees both freelancers and employers as gaming the system, as effectively many freelancers are full-time employees. The IR35 reforms are projected to bring in £3bn over the next four years.
>See also: One third of freelancers say IR35 changes affecting mental health, contemplating suicide
However, the IR35 changes have triggered howls of protest, with freelancers complaining that rushed implementation has seen unprepared and panicked employers drop them. Nearly one third of freelancers say they are having mental health issues, and even contemplating suicide, because of the uncertainty.
And
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One third of freelancers say IR35 changes affecting their mental health
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Freelancers say that IR35 changes to the way they are treated for tax are affecting their mental health and even prompting suicidal thoughts.
Over one third of contractors say that HMRC’s crackdown on how they are taxed, treating them as full-time employees rather than freelancers – known as IR35 – is either damaging their mental health or sending them to their GP for anxiety or suicidal thoughts.
Fifteen per cent of freelancers caught out by the IR35 rule changes are set to default on mortgages or are in the process of selling their homes, according to one survey.
>See also: More than four in 10 businesses could phase out contractors due to IR35
One anonymous freelancer said: “Frequently having chest pains and not sleeping. Added pressure of wife not coping well due to fear of losing family home. Trying to remain calm, but frequently having suicidal thoughts.”
Currently, contractors assess their own tax status, but impending reforms coming into force from April 6 will shift this responsibility to hiring businesses.
HM Revenue & Customs wants stop “disguised employment” gaming the system; working in a permanent position within a company without paying the same tax or employee contributions as full-time
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More than four in 10 businesses could phase out contractors due to IR35
by Anna Jordan • • 0 Comments
Originally written by Anna Jordan on Small Business
New research reveals that as many as four in ten businesses (41pc) will review their strategy around contractors come April 2020 when IR35 is introduced.
The survey from bedigitaluk.com is part of ongoing study into the way that British businesses are preparing for the IR35 legislation. Off-payroll rules are being brought in to combat tax avoidance caused by workers supplying services to clients through an ‘intermediary’.
Out of the 1,500 British business owners surveyed, just under two thirds (65pc) were aware of the IR35 legislation and have a plan set to deal with the law changes. After being informed on what IR35 is, 41pc said they will look to review their strategy for procuring contractors into their businesses. Just over one in ten (11pc) said that they would take more drastic action by decreasing contractor numbers, having a potentially damaging effect on critical projects.
When asked if they’d switched to outcome-based ‘statement of work’ (SoW) contracts, only one in five businesses had done so. Though it’s not that simple – 45pc of businesses admitted to being confused around what action to take next.
Which sectors are struggling the most with IR35?
Those operating within the construction sector were
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Freelancers call government 6-week review into IR35 ‘an insult’
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Freelancers have called the government’s six-week review into IR35 tax changes “an insult” and claim HMRC is intent on bulldozing its controversial reforms come what may.
HMRC wants to bring thousands of freelance contractors who are effectively full-time employees within PAYE to tackle what the taxman sees is “disguised employment”. Responsibility for assessing the tax status of self-employed contractors is due to shift from the contractor to the company that hires them.
IR35 legislation, which has been heavily criticised by tax experts and business as being poorly conceived, badly implemented by HMRC and could reduce a worker’s net income by up to 25 per cent, is set to roll out on 6 April 2020.
>See also: Over half of self-employed don’t even know what IR35 is
However, the Federation of Small Businesses says that big corporations say they’ll pull the plug on contractors if IR35 goes ahead unchanged.
Today (Jan 7) the government launched its review into off-payroll working rules, gathering evidence from affected individuals and businesses, which it says will be completed by mid-February.
Julia Kermode, chief executive of The Freelancer & Contractor Services Association (FCSA), said: “This seems to be another meaningless review from a government who
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Over half of self-employed don’t even know what IR35 is
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Over half of the self-employed in Britain don’t know what IR35 is, despite being the people being most affected by it, according to research.
HMRC wants to bring thousands of freelance contractors who are effectively full-time employees within PAYE, in an effort to tackle what the taxman sees is “disguised employment”. Responsibility for assessing the tax status of self-employed contractors is due to shift from the contractor to the company that hires them.
The legislation, which has been heavily criticised by tax experts and business as being poorly conceived, badly implemented by HMRC and could reduce a worker’s net income by up to 25 per cent, is set to roll out in April 2020.
Accounting software provider FreeAgent surveyed 2,000 self-employed workers about small business taxation.
>See also: Small businesses call for HMRC to delay IR35 tax change
IR35 review
The Conservatives, Labour, the Liberal Democrats and Scottish National Party (SNP) have all pledged to review IR35 – although only the Lib Dems and SNP explicitly committed to a review in their manifesto.
Shadow small business minister Bill Esterson went further, announcing Labour would scrap IR35 being extended to the private sector before backtracking.
At the weekend, Chancellor Sajid Javid confirmed
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Sajid Javid warns Labour will extend inheritance tax to family businesses
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Chancellor Sajid Javid has warned that Labour plans to stop sons and daughters from inheriting family businesses by charging them inheritance tax.
Currently, family businesses are exempt from 40 per cent inheritance tax when a business is handed down to a family member following the death of the owner.
Labour plans to increase personal inheritance tax; currently, parents can leave property worth up to £325,000 before inheritance tax kicks in.
Sajid Javid said: “Labour has said they’re against the principle of inheritance, that’s why they’re changing inheritance tax for individuals, that’s why they’ve cut the allowance. They have also said they’re going to review taxes – and when they use code words like review, that’s the tax that’s they’re most certainly going to hit.”
>See also: Labour pledges to scrap IR35 rollout to business … and then backtracks
Javid was speaking at a hustings organised by the Federation of Small Businesses (FSB) this week, alongside shadow chancellor John McDonnell and Liberal Democrats deputy leader Ed Davey.
McDonnell, putting his head in his hands, shook his head and repeated, “We’re not.”
However, McDonnell, giving his usual avuncular performance, was frank about Britain needing to pay for investment in infrastructure and society