welsh businesses least confident

IR35 Changes Coming in 2020, 2018’s Budget Reveals – But Are Agencies Ready?

Posted 1st November 2018 in News For Businesses For Workers

Chancellor Philip Hammond’s 2018 Budget introduced its biggest revenue raiser this month – a rule change on how self-employed workers in the private sector pay taxes.


The intermediaries regulation, better known as IR35, determines a worker’s tax contributions according to whether that worker is counted as an employee or a contractor. Contractors who are engaged by a third party through their own business, but deemed as being “inside IR35”, are required to pay income tax and National Insurance (NI) at the 12% rate.


2017 saw IR35 undergo a big change in the public sector in a bid to combat tax minimisation, with the responsibility for determining whether contractors fell within IR35 changing from the contractors themselves to the clients employing their services. Though the decision was left to the client, the responsibility for deducting NIC and PAYE – along with most of the liability – fell to agencies.


The Treasury has announced that as of April 2020, the private sector will undergo the same change, with the smallest 1.5 million businesses within the sector exempt.


The Budget’s announcement came as no surprise to the private sector, which has been anticipating the introduction of this change since its initial roll-out into the public sector in 2017.


“When the public sector changes came about in April 2017, clients were too cautious and some gave blanket decisions on IR35 status for all of the roles they had, even though some could clearly be outside the scope of the legislation. This had a detrimental effect on the temporary workforce,” says Zeeshan Anwar, Compliance Manager at JMK.


“We have a year and a half to ensure that all parties in the supply chain understand the new rules and have a chance to openly discuss with each other so that correct procedures are put in place going forward. This will reduce the impact these new changes are likely to have.”

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