'IR 35' - Forthcoming Changes From April 2020 - Don't Get Caught Out!

The 'IR35 legislation', was introduced by HMRC to crack down on a particular form of perceived tax avoidance - whereby individuals would seek to avoid paying employee income tax and national insurance contributions by supplying their services through an intermediary (usually a limited company) and paying themselves in dividends.

'IR35' may have started life as a simple press release in 2000, but it has since become a notorious and difficult area of law for businesses to understand (and hence comply with).

What is colloquially known as ‘IR35’ - generally refers to various separate (and quite 'inelegantly' drafted) legislative provisions – designed to deal with perceived inequality in taxation treatments of certain remuneration related payments - which position (in turn) arises from H.M. Govt.’s own (arguably illogical) taxation approaches to how businesses and individuals are taxed.

The relevant legislation habitually changes over time (as what are seen as ‘tax loopholes’ are ‘closed’); and the U.K. taxation system is about to undergo quite a significant ‘tightening’ in that regard (as I envisage many of you are aware and which may affect your businesses  - operating in the private sector).

Specifically, in July 2019, H.M. Government published draft legislation implementing the Autumn 2018 Budget announcement that, with effect from April 2020, medium and large companies in the private sector that contract with personal service companies (PSCs) for the provision of workers' services will have to account for tax and national insurance through PAYE in the same way as the public sector has been required to do since April 2017. The legislation will be included in the 2020 Finance Bill - scheduled for the Autumn of 2019.

Accordingly, if you (and/or your businesses) are involved with PSCs - Now would be a good time to review your arrangements - If you wish to avoid HMRC scrutiny.

For further information, please do not hesitate to contact:-

Regards

Dan.Johnson@EquitableLaw.com

+44 (0) 7788 537 187 = U.K. Cell. (& e-Tel.)

www.EquitableLaw.com