Efective new tax year 2020/21
What does it mean?
HMRC new rules
Off-payroll working rules change on 6 April 2020 and are applied differently. From this date, all public authorities and medium and large sized clients will be responsible for deciding the employment status of workers.
Who the rules apply to
Some rules already apply to all public sector clients, but from 6 April 2020 medium and large-sized private sector clients also need to apply them. The private sector includes third sector organisations, such as some charities.
The rules apply to all public sector clients and private sector companies that meet 2 or more of the following conditions:
You have an annual turnover of more than £10.2 million
You have a balance sheet total of more than £5.1 million
You have more than 50 employees
Balance sheet total means the total amounts shown as assets in the company’s balance sheet before deducting any liabilities.
What does this mean for the Contractor?
It means Companies that meet the HMRC criteria above will decide on Contractor status. As a Contractor you may be able to challenge that decision but ultimately the decision will rest with the Company and the contractor will have very little influence over the final outcome. So Contractors will have to choose whether to accept the contract “within” or look for a new contract “outside” IR35. Supply and demand a major factor for the Contractor.
We have been talking to interim recruiters and agencies who place Contractors into positions of one year or less. They are seeing an increased trend in Companies recruiting Contractors within IR35. Indeed some of the major Footsie Companies have already announced that they will only recruit Contractors within IR35. For them why take the risk because if you are recruiting for 1 year and then extend for another year that could lead to disputes over employee status with HMRC.
Obviously this will have an adverse financial impact if you have to change from “outside” to “within” IR35 and also there may be fewer opportunities to remain “outside” IR35 in the new tax year.
Who is affected?
Only Contractors providing their services through 3rd parties e.g. limited companies are affected by the new rules. Under the HMRC new rules small companies are exempt so if you work for a small company you probably won’t be affected.
Can you appeal?
Yes you can but what can you do if a company recruits contractors “within” IR35 and have decided on that policy? You can challenge the decision and make a case to try and change the status but if that’s the policy you either accept the contract on those terms or you try and find another contract.
Contact us for advice on anything connected with Contracting.