There are changes coming our way regarding IR35 and whilst these won’t take effect until April 2020, it’s important that contractors working through their own limited companies, are prepared and understand the changes.
We get asked about IR35 a lot of course given the number of contractors we work with, so we thought it would be useful to give you a current definition and to run through next year’s changes.
What is IR35?
Introduced in April 2000, IR35 is legislation designed to ensure that workers are not fraudulently claiming to be contractors working through Ltd companies for tax purposes, when really, they are in effect an employee.
This is determined by various factors as to whether you are “inside IR35” (an employee) or “outside IR35” (working through a limited company with all the tax benefits that brings).
Some examples of these factors are:
- Do you have a set start and finish time?
- Do you have a set office which you report to?
- Are you guided / managed or trained to do your job?
- Do you work for more than one company / client?
- Do you go to company functions / Christmas Parties etc?
So who determines this?
It’s always best to seek professional advice to be safe and so whilst your consultant at 100% IT Recruitment will give you some guidance, we will also refer each case to a tax / IR35 specialist who will come back to us within 24 hours. This gives you the peace of mind to know everything is exactly as it should be.
If it is determined that you are “inside IR35” and not eligible for the tax savings that “outside IR35” contracts bring, there are companies running schemes that enable you to run the contract via your limited company and be paid under IR35 off payroll legislation. They will make the necessary tax deductions at source and take care of all the admin and hassle that you probably don’t need!! One such scheme is run by the Umbrella Company Giant Group called Business Connect. http://www.giantumbrella-limited.com/contactus.aspx
Changes to IR35 – 2020
To date, IR35 has only been applicable for the Public Sector. As of April 2020, it will be extended to cover all Private Sector contractors too. This will impact a huge number of contractors who have previously not been affected IR35.
What action do you need to take?
We still have a year before this comes in to play and many contracts will have ended by then in any case. There are still many of the finer points of the legislation that have yet to be worked out, so I wouldn’t suggest anybody needs to rush out and have their contract examined for IR35 just yet unless you’re in the public sector.
But it’s well worth bearing it in mind and keep an eye on www.100itrecruitment.co.uk or other websites such as www.gov.uk/search?q=IR35 over the next 12 months for definitive guidelines. When it comes to your next contract, and if it is likely to run past April 2020, it is then well worth getting in touch and we’ll be able to advice you further.
If you are contracting for 100% IT Recruitment, rest assured that we will be contacting you to advise on your specific contract nearer the time.