Her Majesty’s Revenue and Customs (HMRC) has told businesses to prepare for “important changes” to IR35.
In an October 2020 Bulletin, HMRC has told businesses that they must prepare for the important changes that are occurring to the off-payroll working rules in 2021.
The governing body declared that they have relaunched help for businesses from the start of October 2020 which will help them prepare for the upcoming changes.
This comes after planned changes, which were meant to occur in April 2020, were delayed by a year due to COVID-19.
We recognise that businesses are facing difficult challenges due to COVID-19. HMRC
is providing information and support now to ensure businesses have plenty of time
to prepare for the changes coming into effect in April 2021.
Many contractors and organisations have already begun doing so, and any preparation now will remain valid for April 2021 when the rules change.
In the employee bulletin, HMRC have specifically urged certain groups to be aware of the incoming changes.
This includes medium or large sized organisations which engage contractors who work through their own intermediary, employment agencies which supply contractors who work through their own intermediary, public authorities (who will face additional changes from April 2021) and contractors who provide services through their own limited company or other intermediary.
As it stands, IR35 applies if a worker/contractor provides their services to a client through an intermediary. However, the worker would be classed as an employee if they were contracted directly.
If IR35 does apply, tax and National Insurance contributions must be deducted from fees and paid to HMRC. The Government have stated that these rules are to ensure that workers pay broadly the same tax and National Insurance contributions as employees.
However, from April 2021, the rules are changing so that organisations that receive an individual’s service will have to decide whether the IR35 rules apply.