Off-Payroll Working

by | Mar 5, 2020 | 0 comments

On April 6th, the IR35 regulation will see medium and large businesses forced to set the tax status of certain contractors and freelancers.  Previously this tax status was set by contractors and freelancers themselves. The fact that the landmark legislation will allows HMRC to collect additional payment where a contractor is an employee ‘in all but name’ is something which many expect to have major repercussions for the contracting economy.  According to research by FreeAgent who provide cloud accounting software for small businesses and accountants, an overwhelming 95% of UK accountants believe that the reforms will have a negative impact on the UK’s contracting industry when they are implemented in April.

You may be affected by the off-payroll working IR35 rules if you are:

  • a worker who provides their services through their intermediary
  • a client who receives services from a worker through their intermediary
  • an agency providing workers’ services through their intermediary

If the rules apply, tax and National Insurance contributions must be deducted from fees and paid to HMRC.

David Cook, Partner, Smarter Accounting comments, “As an accountant of 27 years I have seen a lot of changes and tax cases in connection to IR35. I have read lots of recommendations in the past of how to resolve this issue, none of which have been implemented.  What concerns me from the FreeAgent research is that than half (59.3%) of respondent (Accountants) said that they did not think their own clients properly understood the reforms to private sector IR35, while less than a third (29.3%) said that they believed their clients did understand the changes.  Two years ago we had the changes to public sector workers under IR35 contracts. I warned clients then that it will come to the private sector.  Why are accountants not understanding these rules themselves and not communicating them to their own clients?”
“The second concern about the research is that a bookkeeping software company is raising this concern. FreeAgent, QuickBooks, Xero are just that, bookkeeping software. At smarter Accounting we work with all 3 software companies and use them as tools, however we the humans, the accountants with the knowledge. I do wonder if the Accountants and FreeAgent are more interested about their loss of revenue as a result of the changes, than their clients ‘best interests’.  Why are Accountants not discussing IR35 with their relevant clients?  We are in a phase of another consultation on this matter and have a budget next week, so I accept we are in an uncertain period at present, however we should still be able to advise on current rules and changes.  If you have any concerns on this matter please feel free to contact me.”
Information from the HMRC >


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