Time to make IR35 a priority, urges expert
“If marine businesses out there are using contractors and have not started making preparations for IR35 or do not know what IR35 is, I would urge them to make it a priority,” says James Ward, Managing Director of Marine Resources.
HMRC’s controversial IR35 ‘off-payroll’ legislation rolls out to private sector contractors in April.
The intermediaries legislation, or IR35 as it is now known, first came into force in April 2000, with the intention of preventing a worker from ‘disguising’ themselves as a freelancer to pay less tax. IR35 assesses whether contractors are ‘actually’ employees when they take on work for clients. Now under the latest reforms, it will be the responsibility of the private sector ‘clients’ or ‘hirers’ to assess whether or not contractors need to pay Income Tax and National Insurance contributions. From 6th April, medium and large private sector businesses will need to apply the IR35 rules if they meet two or more of the following conditions:
· An annual turnover of more than £10.2m
· A balance sheet total of more than £5.1m
· More than 50 employees
Inside or outside of IR35?
If an organisation engages a contractor and determines the role is ‘inside’ IR35, income tax and National Insurance will now be deducted from the contractor pay, exactly as if they are employees. Roles ‘outside’ of IR35 are ones where contractors will be taxed as they were previously.
It is the responsibility of the organisation to complete an assessment to determine IR35.
“Over the past month, we have witnessed contractors withdrawing from roles across the industry because of concerns about IR35, so understanding it is critical, especially with such a high proportion of contractors across the industry,” says James. “The reform is a seismic shift and will impact many individuals who may be used to paying tax in a certain way. Some may reconsider working as a contractor and opt for a PAYE role.”
Marine Resources’ fact sheets are available online. Alternatively, the Marine Resources team is on hand to answer any IR35 questions over the phone via (0)23 8063 3399.
