LIMITED COMPANY CONTRACTORS
YEAR 2000
Legislation brought in to reduce contractor tax avoidance. If the contractor is treated like an employee by the client, then they are 'inside' IR35, and their earnings are subject to PAYE tax and National Insurance Contributions (NIC). But it's down to the contractor or their limited company to declare if they are 'inside' or 'outside' IR35.
YEAR 2017
With too many people claiming to be 'outside' IR35 and the subsequent loss of tax revenue, HMRC changes the law for contractors working within the public sector. Now it's down to the end client to say if the contractor is 'inside' or 'outside' IR35. If the contractor is 'inside' then they will be paid net of PAYE and NIC, not gross.
NOW IT'S THE PRIVATE SECTOR'S TURN
If your present contract runs beyond 5 April 2020, then the chances are that it's going to affect you, unless your end client is a small company* in which case you're exempt, or if you provide services via an umbrella in which case you are already being paid net of tax and national insurance contributions.
We'll be working with all our clients to make sure they have the right processes in place. Some already have it sorted out. Some haven't started yet. It's a big change for them too.
THE QUESTION IS, ARE YOU 'INSIDE' OR 'OUTSIDE' IR35?
The end client has a number of ways of working that out. They could use the free CEST tool created by HMRC, though it only works in 75% of cases. There are some more effective tools that are commercially available they could also use. Or they could simply declare all their contractors are within IR35.
Whatever they decide, they will first tell us, and we will pass that information straight on to you. From April 2020, the client's decision will be given to you directly, and you'll also have the right to challenge that decision.
IF YOU HAVE ANY QUERIES ABOUT IR35 AND HOW YOU MIGHT BE AFFECTED BY IT, PLEASE SPEAK TO YOUR INNOVA REPRESENTATIVE
For a more detailed look at IR35 and how it might affect you,click here to read the blog from our legal counsel.
*A SMALL COMPANY IS ONE THAT MEETS TWO OF THE FOLLOWING THREE CRITERIA - A TURNOVER OF NO MORE THAN £10.2M, NO MORE THAN 50 EMPLOYEES, A BALANCE SHEET TOTAL OF NO MORE THAN £5.1M