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IR35 confusion reigns – here’s how to become compliant by April 2021

We recently wrote about IR35 and how it’s been delayed due to the Coronavirus pandemic.

The IR35 legislation – which has existed for over 20 years – was due to be amended this year, focusing on private sector contractors who were deemed as working off-payroll. 

From April 2021, as well as contractors having to continue defining and disclosing their working status to HMRC, the legislation’s amendments will now also make it the responsibility of private sector companies to clarify the IR35 status of their contractors too.

Recent research published in the FTAdviser, though, has shown that, despite the delay, contractors and companies across the UK are still having trouble understanding IR35 and whether they need to make any changes to their operations before next April.

The data, gathered by Qdos, shows that over half of contractors will reject the IR35 assessments made by their client. They polled over a thousand limited company contractors to come to their conclusions.

Qdos discovered that just 17% of contractors, who had been placed within IR35 by their client, said they would accept that assessment.

56% of contractors assessed as inside IR35 by their private sector clients say they’re planning to go back outside the tax bracket, while 27% said they were ‘unsure’.

Perhaps most worryingly, Qdos found that around 40% of contractors felt they’d been subject to being ‘blanket-placed’ within IR35 by their private clients with little focus on them as individuals.

Still confused by IR35? Greatpay’s friendly financial experts are here to help you understand the legislation.

Making sense of IR35 before April 2021

The blanket approach is one that GSK has taken, telling their contractors to ‘go PAYE or have their contract terminated’, according to an article published by The Register.

If private firms are blanket placing contractors inside IR35 with no real understanding of the legislation, and contractors themselves are unsure of what IR35 means for them, then it creates a perfect storm of confusion.

It’s a storm the House of Lords appears to have spotted, with a recent report from a Lords select committee urging the government to “completely rethink” IR35, saying the burden it puts on businesses and contractors is too great and unfair.

The government, though, shows little to no sign of rethinking IR35, and as it stands, contractors still have to make sure they’re compliant by April 2021 or face potential unseen tax consequences.

It doesn’t have to be that way, though. The Greatpay team is here to help contractors make sense of IR35 and take the hassle of it from their shoulders. It’s the Greatpay way!

Our flexible financial experts will work closely with you to get you IR35 compliant as soon as possible, and make sure you’re aligned to other evolving HMRC legislation both now and in the future.

Some contractors think it will be as easy as moving from a limited company to an umbrella model before April 2021 to become IR35 compliant. 

It’s not as simple as that, and could actually raise flags at HMRC that you’ve been within IR35 legislation for years, and have to pay the necessary back taxes.

Would you have changed to an umbrella model if IR35 wasn’t hanging above your head? That’s just one of the questions HMRC could be asking after April 2021 if you take IR35 lightly… 

Don’t let IR35 impact your business. Contact the Greatpay team today to find out if you fall under the legislation and how to become compliant ASAP.

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