The extension of IR35 rules to private companies from April 2020 will shift responsibility from contractors and their personal service companies (PSCs) to the hirers. Andrew Brookes, head of employer solutions at Menzies LLP, explains the tax implications
The government’s decision to roll out the IR35 changes to the private sector at Budget 2018 in October was of little surprise. It had been clear for some time that it intended to crack down on tax avoidance by so-called ‘disguised employees’, primarily those providing their services via an intermediary to avoid paying tax in the same way as direct employees.
Due to come into force in April 2020, the new rules for private sector businesses are expected to be similar to those that already apply in the public sector.
Under the new rules, ‘engagers’ rather than ‘contractors’ will be responsible for determining IR35 status.
For this reason, it is essential that employers implement a meticulous approach to reviewing contracts and testing workers’ employment status on an individual basis to avoid falling foul of HMRC legislation.
