IR35 in the private sector from April 2020
Posted on 28th November 2019 at 20:58
IR35 Draft legislation for the proposed new rules in the private sector from April 2020
From 6 April 2020, new IR35 changes will be introduced. Where you personally provide services to a client through a company in which you own ordinary shares, and the client is a private medium or large business, the responsibility for determining whether the off-payroll working rules (known as IR35) apply will move to the business receiving an individual’s services. Where the end client is a small company, the personal service company will continue to be responsible for assessing whether IR35 applies.
According to the Companies Act 20016, a small company is defined as one that does not have a turnover of more than £10.2 million, a balance sheet total of more than £5.1 million and does not have more than 50 employees.
On 11th July 2019, the government published the draft legislation for the proposed off-payroll private sector rules from April 2020. The final legislation is expected to be confirmed by the Chancellor of Exchequer as part of the Autumn Budget 2019 to be delivered after the General Election in December 2019.
For current and new contracts that will run until 6 April 2020 or later, your client should carry out a review well before that date. HMRC has a check employment status for tax” (CEST) online tool.
Disputing IR35 Status
If you disagrees with your client’s determination, you can formally dispute it. You should write to the client setting out the reasons why you think they are wrong.
Your client must then consider your reasons and:
• decide whether to stick to or change their decision and notify you of their reasons
• keep a record of the determinations and the reasons for them
The client must respond to your request within 45 days of receiving it. During this time the client should continue to apply the rules in line with their original decision.
If they don’t respond within 45 days, the responsibility for paying tax and National Insurance contributions will become their responsibility, so they will be liable to cover the tax due.
The above article is prepared using information published in the Draft Bill. It needs to be noted that Draft Bills are issued for consultation before being formally introduced to Parliament. This allows proposed changes to be made before the Bill's formal introduction. The practice of publishing Draft Bills has become more frequent in recent years. It allows examination and amendments to be made to texts and made more easily - before their formal introduction to Parliament as a Bill proper.
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