More confusion is set to take place in the next few months, however, as IR35 rolls out in the private sector in April 2020. The move has faced intense opposition and ongoing lobbying requesting them to delay the move, leading to many questioning if there will be an IR35 delay.
Read on as we explore IR35, the upcoming changes, and whether the government are willing to delay their plans.
Without even starting to consider the changes, IR35 itself is a confusing concept. It’s a piece of legislation rolled out by the government to catch ‘disguised employees’: people working as contractors, despite actually working full-time for one organisation, to enjoy the financial benefits.
As such, IR35 has outlined requirements to determine the true employment status of individuals. These include things such as whether an individual can determine when and where they work, as well as whether the client is required to source ongoing work.
Initially, the legislation was just rolled out in the public sector, leading to considerable negativity. The confusion surrounding the legislation and its terms caused stress and upheaval, with many contractors not happy for their end clients to determine their status. Contractors have also been caught out and faced substantial financial penalties.
On 6th April 2020, IR35 is set to roll out across the private sector. Many will then have to decide whether they are inside or outside of IR35. This is a change that, according to HMRC, will bring in an additional £3.1 billion in tax over the next four years.
If they are inside, which many workers are likely to do, the company will be responsible for making the contractor’s tax and NI deductions as they’ll be seen as working as an employee. The contractor will have to pay the same amount of tax and National Insurance as employed members of staff.
If a contractor is deemed to be outside of IR35, it will be up to the contractor to make their deductions as they will be seen as genuinely self-employed. This will be the ideal situation for contractors as they’ll be able to continue operating as before.
Thanks to the upheaval caused in the public sector, tens of thousands of contractors are understandably now concerned about the effect it will have on their lives. This is because the changes will mean that their end-clients will have the responsibility of determining their employment status.
Considering the financial complications of each choice, businesses are understandably concerned about getting it wrong and facing the penalties, as are contractors. If HMRC believes the wrong decision is made, they will expect missing tax and National Insurance contributions to be made in full. They will also have the power to implement a penalty charge on top.
It’s worth noting, however, that not all companies will be affected. Contractors working with small businesses won’t need to face concerns over the IR35 determinations as the changes only apply to large companies.
Business with a turnover of less than £10.2 million a year will be unaffected, as will those who have balance sheet assets of less than £51 million, and those with less than 50 employees.
If a contractor is working with a business that relates to at least two of these criteria, they will still be responsible for determining their own status.
With the response to the changes so negative, HMRC was asked if there would be an IR35 delay. However, at the end of February, they responded to say there would be no delay, but they would make changes to reduce the immediate impact of the legislation.
For the first year of the new rules, any penalties would be faced have now been removed with the exception for cases with deliberate non-compliance. There will also be a legal obligation for clients to respond to any information requests to help in determining the size of their business.
Any contractor worried about tax years prior to the rollout will also have no cause for concern as HMRC have confirmed that they will not be opening new investigations into companies for tax years prior to April 2020.
If you were hoping for an IR35 delay and are still concerned about the changes, working with an umbrella company could help you.
By working under an umbrella company, you’ll be clearly defined as an employee and will be paying the same tax and NI contributions as a permanently employed staff. You’ll also have access to employer benefits, including sick pay, holiday pay and a pension.
However, you’ll still have the full freedom of being self-employed, and able to take home all earnings after the required deductions have been made. You also won’t have to do all of the administrative leg work involved with being a contractor.
Umbrella companies, therefore, provide the perfect protection for those concerned about the changes. You can stay safe in the knowledge that your status will accurately be determined and avoid worrying about potential financial repercussions.
Interested in finding your perfect umbrella to provide clarity in the IR35 storm? Try out our nifty umbrella company comparison site. Enter a few pieces of simple information and peruse a range of umbrellas that will be ideally suited for your needs. Quickly review their costs and benefits and make the perfect choice for you.
Any contractor considering switching to an umbrella company will want to know how to find the best provider to work with.
Although you could spend your precious time and energy searching the web for the best umbrella company, there is an easier way – using an umbrella calculator.
In this guide, Umbrella Supermarket explains why every contractor should use an umbrella calculator in 2021.
If you are considering contracting you will need to decide on PAYE or umbrella.
It can be a difficult decision to make and contractors will inevitably be questioning which option will be the best for them.
To help every contractor get on the right track for them, in this guide Umbrella Supermarket looks at PAYE vs umbrella, outlining the key differences and how this will impact you.
There are many reasons that contractors across the UK opt to work under an umbrella company.
Umbrella companies offer an easy way to contract and remove the need for the contractors to worry about the burdens of admin, finances, tax and IR35, all things that limited company contractors have to deal with.
For this reason, many contractors will be weighing up their options and questioning whether it is worth using an umbrella company in 2021. To help make the decision that little bit easier, Umbrella Supermarket has put together this guide on the pros and cons of using an umbrella company.
Any contractor that is considering operating through an umbrella company in 2021 will need to understand Umbrella Company fees - from why an umbrella company charges fees, how they are paid to how much the contractor will pay.
In this guide, Umbrella Supermarket answers those all-important questions to help every contractor know exactly where they stand when it comes to umbrella company fees.
If you’ve made the decision to contract through an umbrella company in 2021, you will next need to find an umbrella company that’s right for you.
After all, there are lots of umbrella companies out there, so how do you know which one to choose?
To help you find the best umbrella company for you, in this guide Umbrella Supermarket outlines what makes a good umbrella company, so you can rest assured you’re making the right move.
One of the many advantages to operating through an umbrella company for contractors is that they become an employee of their chosen provider.
In turn, this means that the contractor will be automatically enrolled onto the umbrella company’s workplace pension scheme.
To help contractors find out more about umbrella company pensions Umbrella Supermarket has put together this handy guide.
If you are considering contracting through an umbrella company you will naturally have questions and queries over how they work.
After all, making the move to umbrella can be a big step for contractors. To help, in this guide Umbrella Supermarket explains how to get started with an umbrella company and share our top tips for using one in 2021.
PAYE or umbrella is a question asked by every contractor. Which one you opt for will have a big impact on your contracting career and lifestyle. So, it's important to make the right decision for you.
To help makes things a little bit easier, Umbrella Supermarket has put together this guide on PAYE or umbrella, outlining the key differences between each, to help you make the best and most informed decision for you.
One of the many benefits to working through an umbrella company is that you will receive holiday pay as well as a range of other statutory benefits including sick pay, maternity and paternity pay.
To find out more about umbrella company holiday pay, and how to calculate how much you will be entitled to, Umbrella Supermarket has put together this handy guide.
Contractors must make several decisions throughout their contracting careers. One big decision contractors have to make is how they will operate.
One way that contractors can work is through an umbrella company.
Umbrella companies have become an increasingly popular way to contract in the past few years, offering many benefits to the contractor. But, how do you know whether this option is right for you?
To help every contractor make the right decision for them, in this guide, Umbrella Supermarket explains when not to use an umbrella company.
There are tons of benefits to using an umbrella company, which is why they have become such a popular option for contractors in recent years.
After all, an umbrella company takes away the stress and hassle of operating through a limited company whilst offering contractors a range of advantages, such as statutory rights, paying them a salary, deducting correct tax levels and National Insurance, and taking care of tasks like expense processing and invoicing.
However, as more and more contractors opt to use the services of an umbrella company, more providers have started to claim that they are HMRC approved.
To bust the myths around HMRC approved umbrella companies and get straight to the facts, in today's guide Umbrella Supermarket look at whether HMRC approved umbrella companies really exist, so you know exactly where you stand.
If you're considering making the leap to contracting, you will understandably want to know how much you will have to pay in umbrella company costs. After all, this amount comes directly out of the contractor’s pocket, so it’s important to be clued up on how much you should expect to pay.
To help contractors, in this guide Umbrella Supermarket answer the all-important question of how umbrella companies cost in 2021.
