Finance Bill Confirms Private Sector IR35 Details
The Treasury has published the Finance Bill 2019-20, which confirms a number of important details about the upcoming IR35 reforms in the private sector.
Ignoring some of the recent calls for the reforms to be delayed, the bill confirms that off-payroll rules will be extended to the private sector from 6 April 2020.
In line with the changes in the public sector, private sector clients will be responsible for assessing a contractor’s IR35 status. Previously, this responsibility lay with the contractor.
As expected, the Finance Bill also says that small companies will be exempt from the new legislation. A company will qualify as small if it meets two of the following criteria:
- Turnover of £10.2m or less
- £5.1m or less on the balance sheet
- 50 employees or less
When the reforms were introduced in the public sector, there were reports of organisations applying blanket decision making to contractor determinations. To try and limit this, the Finance Bill says that clients must complete a status determination in each case. But clients can still insist that their contractors go on to the payroll.
The Finance Bill also appears to have ignored calls for an independent appeals process when the contractor disagrees with a determination. Instead, contractors will have to navigate a ‘client-led disagreement process,’ which could make it difficult to get a wrong decision overturned.
To add insult to injury for contractors who may be caught by IR35, the policy note actually states that there will be savings for PSCs who will no longer have to do their own determinations. It also says that PSCs will be better off because they won’t have to pay accountancy fees.
While these small actions may save contractors some time and money, an inside IR35 judgement could result in a contractor paying an extra £7,500 in tax.
Miles Grady, Director of Umbrella.co.uk, said: “Just a few months after closing their consultation on the issue, the government has essentially ignored all complaints and warnings from contractors, employer’s organisations and private sector clients.
“Among contractors, there is a sense that the Treasury wants to stack the odds against contractors, making it easy for clients to impose an IR35 ruling and harder for limited company contractors to avoid employee taxes.”
For more information about IR35 and how you can avoid it, speak to a member of the team today. Call: 0800 121 6513.