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What is IR35
IR35 was first introduced in April 2000, a UK tax legislation designed to identify contractors and businesses who were avoiding paying the appropriate tax by working as ‘disguised’ employees; or, are engaging workers on a self-employed basis to ‘disguise’ their true employment status.
Abuse of self-employment has been a problem for the government for decades – losing out on employer’s National Insurance based on 13.8% of the worker’s gross salary.
In April 2017, new legislation came into force directly affecting the public sector, those working in medical, health and education. Knowing how vast the private sector was, HMRC scheduled off-payroll changes to encompass remaining contract workers from 6th April 2020. However, due to CoVID-19, implementation was delayed for the following year.
With the world in turmoil over the Coronavirus and impact on the economy, tax and recruitment experts, along with employers in the private sector are keen to know if it will be delayed further, or scrapped altogether.
Following the Finance Bill held on 22nd July 2020, it was evident that the government wanted to see it through. Royal Assent was granted for the changes to be enforced, confirming the new date of 6th April 2021.
Who do the new rules apply to?
The new rules apply to medium to large companies who fall under these criteria, where at least two apply:
- Annual turnover of over £10.2 million
- Balance sheet total greater than £5.1 million
- More than 50 employees