Let's begin by explaining exactly what IR35 is!
IR35 is the term that's used to describe contractors and the firms hiring them. It's specifically in relation to tax avoidance where contractors are supplying their services to firms via an intermediary (in most cases a limited company) but who would be an employee if the intermediary was not used.
IR35 has been in place since April 2000, but is being replaced by the Off Payroll Tax that's been in place in the public sector since April 2017, and finally extended to the private sector from April 2020.
It's being enforced to combat the cases where workers aren't officially employed by a business on an employment contract. Instead they work for the business on a self-employed basis and usually through an intermediary, meaning that they are effectively deemed, or "disguised", employees. It results in what can be significant financial savings for both parties. The business is exempt from paying employers’ NICs of 13.8% or the Apprenticeship Levy of 0.5%, and they are also not required to offer any employment rights or benefits. For worker’s, it can increase their net income by up to 25%, because as a limited company contractor they can save a significant amount of money in additional income tax and NICs.
It's estimated that around 170,000 self-employed contractors could be hit by IR35 and there are a number of people out there who may still be wondering how to tackle it.
If you need help with ensuring you're compliant with the requirements of the IR35 changes, then Knight Accountants in Hastings are on hand to help.
Knight Accountants have access to one of the leading UK experts in the tax arena who pass this vast knowledge onto their clients. For access to this genuine tax expertise and more, contact the Knight team for an initial consultation today.
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