IR35: HMRC pushes ahead with tax reforms

From 6 April HMRC will tighten the net on freelance workers. All medium and large private businesses will have to decide the IR35 status of their freelance workers throughout their company.

In April 2020, HMRC will begin taxing thousands of self-employed workers at a higher rate, in a bid to cut down on a tax loophole used by some self-employed workers who operate through limited businesses.

If you are a contractor, freelancer or self employed and you are under investigation by HMRC or suspect that you soon will be investigated, then do not delay in seeking legal advice from specialist HMRC tax dispute solicitors.

What is IR35?

HMRC introduced IR35 in 1999. The intention was to prevent individuals working in a manner which was effectively the same as employees, but under the guise of limited companies. However, these self-employed individuals do not have to pay national insurance and were paying lower income tax.

Originally, the onus was on individuals to assess and then declare to HMRC that they fell under IR35. However, HMRC are now tightening the net on these self–employed workers by shifting that onus to businesses to determine the status of their contractors.

HMRC claim that currently only 1 in 10 contractors, who should be paying these taxes are doing so and that these changes will bring in an additional £3.1bn in additional tax revenue between 2020 and 2024.

Will IR35 apply to my business?

You should note that the changes coming in April will apply to larger companies which are in the private sector. If your business falls under any two of the following criteria you will be unaffected by the changes coming in April:

• If your business has a turnover of less than £10.2m a year;
• If the balance sheet shows assets less than £51m a year; or
• If your business has fewer than 50 employees.

Will IR35 affect me as a self–employed worker?

Generally: if you carry out work for a fixed fee, work simultaneously for multiple clients and have control over where and who you work for, you are likely to not be affected by IR35.

If you are worried HMRC has an online tool to aid in assessing if you should be classed as employed or self-employed.

However, some self-employed workers argue that the tax is unjust as they will have to pay the same income tax and National Insurance contributions as full-time employees without the same benefits such as holiday pay or parental leave.

Are there any deadlines for IR35?

A ‘check employment status for tax’ assessment (CEST) must be undertaken by all freelancers or contractors who operate under the guise of a company by 28 March 2020.

However, the new Chancellor of the Exchequer, Rishi Sunak, has addressed concerns about IR35 this week stating:

“I have spent time with HMRC to ensure that they are not going to be at all heavy-handed for the first year to give people time to adjust as well, which I think is an appropriate and fair thing to do”

Expert London Tax Investigation Lawyers

We can help you at every stage of any HMRC Investigation. Our legal team has first-hand experience and knowledge of how HMRC works at every level, in particular in relation to their legal and complaints teams. 

We provide the very best representation in negotiations with HMRC and defending all allegations in a tax enquiry, tax fraud investigation, criminal tax evasion or similar investigation. 

We have a track record of successfully challenging HMRC decisions and will assist you and appoint forensic support where necessary to provide expert reports. Unlike accountant tax advisers we analyse the merits at the outset and keep them under review and we won’t have to hand over all your confidential data as lawyers have legal advice privilege unlike accountants.

Our specialist Tax Solicitors and Barristers deliver expert technical knowledge, strong negotiation skills and advice which can make a pronounced difference to eventual tax penalties, charges and liability.

We provide tax advice and representation against HMRC. Get in touch with our expert tax solicitors and barristers so we can get you a result. We provide a quick no cost initial telephone case review to establish whether or not we can help you; just call one of our team on 02071830529.