Will There Be an IR35 Delay in 2020?

IR35 in 2020 - Umbrella Supermarket

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.

IR35: what is it?

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.

 

IR35 and the private sector

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.

Inside IR35

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.

Outside IR35

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.

Concerns in the private sector

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.

Small vs large businesses

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.

Changes to IR35

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.

How umbrella companies can help

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.

Finding your umbrella company

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.

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