Whether you’re a self-employed freelancer or an agency contractor in the Sheffield region, you’re probably looking for specialist contractor accountants with experience in supporting and advising clients like yourself.
IR35 Contractor Accountants
Getting to grips with the implications of IR35, and the self employed/employed debate can be daunting, and you may worry it could leave you open to a negative response from HM Revenue and Customs. From IR35 advice to tax planning for contractors, we could help you get your accounts in order and protect you from an HMRC investigation.
As your local Chartered accountants for contractors and limited companies, our experience comes in understanding how HMRC are likely to interpret the rules in your individual case and ensuring that your affairs are presented in a way that maximises your income while minimising your tax liabilities.
This area can be complex, and while there is a lot of information available to contractors – engaging a professional can save many hours, frustration, and a considerable amount of tax.
Our experienced and professional advisors can provide a range of services that will put you on the right footing and ensure that your affairs are always in order. Our contractor payroll administrators could help you save money and time, and reduce your risk of late payment.
IR35 changes repealed
If you work as a contractor, or your business employs contractors, you will almost certainly have heard of IR35, or Intermediaries Legislation. Understanding this complex piece of tax legislation, on the other hand, is easier said than done, and recent changes have only made it more complicated. And now the government plans to repeal the 2017 and 2021 amendments to the legislation, taking IR35 back to the original rules set in 2000, by April 2023.
To find out how you can determine whether you or your contractors fall inside or outside IR35, and what you need to do to be IR35 compliant, read on. Whether you work in the public or private sector, everything is explained below.
What is IR35?
IR35 refers to the government’s anti-avoidance tax rules that aim to fairly tax ‘disguised employment’, i.e. contractors working off payroll through an ‘intermediary’, such as a limited company. IR35 applies if the contractor would effectively be employed by their client if it weren’t for the intermediary.
Off payroll working rules were first introduced in 2000 to tax contractors similarly to employed workers, removing any incentive to register falsely as a contractor in order to avoid tax. If you’re deemed to be inside IR35, you’ll pay the same PAYE tax as an ordinary employee.
IR35 in the public sector
HMRC made changes to IR35 for the public sector in 2017, placing the responsibility for determining whether a contractor came under IR35 or not on the public sector authority.
To assist with this, HMRC created a tool to help public authorities make the decision quickly and easily, called Check Employment Status for Tax (CEST).
Since April 2021, public sector authorities have had extra responsibilities for remaining IR35 compliant. In addition to deciding the employment status of your workers:
- You will have to provide your determination and the reasons for it to the worker and the person or organisation you contract with;
- You’ll also have to keep detailed records of your employment status determinations, including the reasons and any fees paid;
- And you’ll need to have processes in place to deal with any disagreements that arise from your determinations, responding within the time limit of 45 days.
Failure to comply will result in the worker’s tax and National Insurance contributions (NICs) becoming your responsibility, so it’s essential you stay on top of your IR35 requirements.
These changes are in the process of being repealed and will no longer apply from April 2023, but it’s important to remain complaint until then.
IR35 changes in the private sector
Currently, if you work off payroll in the private sector, the intermediary is required to make an extra payment to compensate for the additional tax and NI that HMRC would have received on an equivalent employee’s wages.
However, new IR35 rules came into effect in April 2021, bringing the private sector in line with the public sector and taking the pressure off individual contractors. These IR35 legislation changes mean that from 6 April 2021, all public authorities and medium and large sized private sector clients are responsible for deciding the employment status of workers.
For the purposes of IR35, private sector includes third sector organisations, such as some charities. However, these changes will be repealed by April 2023, and the onus will be on the individual contractor, rather than the organisation.
CEST and IR35
CEST stands for Check Employment Status for Tax, and refers to the government’s digital tool allowing workers, employers and public authorities to assess whether an individual falls inside or outside the scope of IR35. It consists of a simple questionnaire and can be used for both public sector and private sector contractors, making it easy for both employers and contractors to identify their position with regard to IR35 and tax.
If you’re a contractor or employer in the construction industry, download our factsheet Construction Industry Scheme Update.
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