One year on from the IR35....

I recently read an article where it stated a BBC Presenter may be ordered to pay up to ￡420k in unpaid tax after HMRC wins a ruling that determines the BBC Presenter as ‘Outside IR35’ although she was being paid by the BBC into her Limited company.

Being self-employed allowed contractors to work through their own limited company, allowing them to pay a lower rate of tax. For example, a contractor earning ￡50k a year will pay 2% in tax, whilst PAYE staff will pay 26% in tax for the same salary.

This is where the 2017 IR35 legislation comes in! If HMRC deems a contractor/limited company to be ‘employed’ by the company, you will pay the same tax as someone who is on PAYE – this is deemed as ‘Inside IR35’.

And now it looks although IR35 will now come into effect in the Private Sector within the next 12 months. I predict, for those contractors that went through the trials, errors and pain that it was in 2017 will walk through this stress-free. However, for those contractors who were lucky enough to already work in the Private Sector, or at least not be affected by the legislation change – well, you my friend are in for a whirlwind of stress that begins the day it is confirmed!

Personally, it’s only fair the IR35 legislation is changed within the Private Sector to match the Public Sector – after all, its equal opportunities, right?

Four pointers for those that are waiting for the change in the Private Sector or to those that are looking to move into the Public Sector:

Check your employment status - https://www.gov.uk/guidance/check-employment-status-for-tax

Do NOT take out ‘IR35’ insurance (biggest waste of money – work with a good agency, honest client and check your status and there is no need to give an insurance company money for something that you can’t always control).

If you are deemed as ‘Inside IR35’ – go through an Umbrella company – it’s easier, cost effective and if you are investigated by HMRC, you will be secure (again, another reason why IR35 insurance is irrelevant)

If you use agencies (recruitment or consultancies), ensure you have an honest and transparent relationship whereby they assist, advise and support you.

To summarise, ultimately there is nothing to fear in regards to IR35 providing you are legitimately a contractor ??