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Contractors not happy with IR35 rules

IR35, a measure to tackle tax avoidance, has been criticised for creating unnecessary costs for small businesses who supply workers for public contracts.

In May 2018, the government opened a consultation into widening the scope of IR35. Presently, IR35 applies to public sector contracts, but the government is looking at extending it to the private sector.

IR35 applies to workers who supply their services using a limited company or agency as an intermediary. If they did not use an intermediary company, they would be classed as employees. HMRC calls these arrangements “disguised employees” and says that these workers should be paying income tax and National Insurance contributions. This can reduce a contract worker’s income by up to 25%.

Any public sector organisations who use contractors through a personal service company has been asked to judge whether their workers should pay tax and national insurance.

Consultants Contractor Calculator surveyed 2,000 contractors and freelance workers and found that 98% of them would turn down work if it meant being paid through PAYE. HR professionals are concerned that if IR35 is extended to the private sector, it will increase administration costs.

In the Wirral, there is a proposed £1bn development scheme to regenerate New Ferry. If IR35 covers contractors working on the scheme, it could include contractors applying to work on the regeneration.

Accountants in the Wirral can assist contractors in the region in dealing with the issue of off-payroll working and whether they should be paying personal income tax on money received.

Posted by Louise
August 7, 2018
Tax

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