Upcoming IR35 changes by HMRC you should know starting in 2020.

What is IR35 Legislation?

The IR35 is a UK tax legislation introduced by HM Revenue & Customs (HMRC) in 2000. Its purpose is to ensure contractors pay the right amount of tax and National Insurance by ensuring workers (classed as ‘disguised employers’) cannot use a limited company , to pay less tax as they should be employed directly by the client they are working for and treated as an employee. If a worker is seen as an employee, they would have to pay the same tax and National Insurance as a permanent employee. The government defines IR35 as ‘off-payroll working through an intermediary’.

Changes to IR35 Legislation?

Changes are being implicated into IR35 Legislation due to contractors not paying the correct tax and National Insurance and incorrectly assessing their IR35 status. The non-compliance has reportedly costed HMRC millions therefore the rules are changing in hope to ensure compliance. 

IR35 changes are being introduced in April 2020 to move the responsibility for assessing IR35 obligations from the contractor to the end user. The fee payer will be responsible for calculating and paying the related tax and National Insurance contributions to HM Revenue & Customs. 

Who is affected by IR35 upcoming rules?

• Contractors providing services to medium and large businesses;
• Fee-payers in the recruitment sector; and
• Medium and large businesses in private sector that are end user of the worker’s services.

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