Taxation

Autumn Budget 2018 IR35

Autumn Budget 2018 IR35

The Autumn Budget in 2018 confirmed the following changes to IR35:

What is IR35?

IR35 is the legislation which prevents employees disguising themselves as self-employed through Limited company status and therefore paying less taxes.

Employees and employers were avoiding paying employment taxes by outsourcing work to one-man band Limited companies. These were typically employees in all but name and they did exactly the same role as the actual employees. It was purely done as tax avoidance.

If you look like you are an employee of that business you may be affected by IR35. But genuine self-employed individuals will not be affected.

IR35 avoidance

IR35 was introduced in April 2000. The responsibility for checking the status of IR35 has always been on the individual. The public and private sector contractor providing the work was not obliged to check IR35 legislation so abuse of the tax system continued.

IR35 in the public sector

In April 2017 it was announced that the responsibility for checking IR35 would fall on the public sector body for all public sector contracts. If they deemed the individual to actually be an employee in all but name then they had to pay additional NI.

This had a significant effect on individuals working for government bodies including the NHS, the BBC and Channel 4 plus many more.

IR35 in the private sector

Currently the private sector hasn’t been under the same scrutiny as the public sector. However, from April 2020 the responsibility to check IR35 status falls on the business engaging the contract.

Small organisations will be exempt from carrying out these checks but all other organisations and agencies will be brought in to line with the public sector requirements.

The main individuals this is anticipated to affect are IT contractors, consultants and engineers.

Return to the Autumn Budget 2018 Overview

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