Are you a self-employed freelancer or contractor?
If so, you're likely already aware of the upcoming changes to how you work in the private sector due to the "off-payroll working reforms" taking effect in April. Here's what you need to know to remain compliant and avoid potential tax issues:
- The proposed changes mean that you need to regularly evaluate your working practices to ensure compliance. While the end client or recruitment agency will primarily determine your IR35 status, you still have a responsibility as the contractor or freelancer to ensure the determination is accurate and up-to-date.
- The new legislation is aimed at identifying businesses that blur the lines between employees and contractors/freelancers to avoid paying their fair share of taxes. Large organisations that keep contractors on for longer than they should are particularly targeted.
- This means that the responsibility for determining your IR35 status now falls on the end employer or middle agency. They must prove that they have assessed that you are truly a freelancer/contractor and not an employee in disguise to avoid paying additional tax and national insurance.
- The good news is that small companies are exempt from these changes. Medium to large organisations in the private sector are targeted, but working with a small organisation outside of the public sector means you can still determine your IR35 status as you did before.
- A small company is defined as having an annual turnover of less than £10.2 million, assets on the balance sheet totaling less than £5.1 million, and no more than 50 employees. Any business exceeding these criteria must produce a status determination and supporting reasons for their outcome to all parties in the chain.
- Companies and agencies can no longer make blanket decisions about IR35 status. Instead, they must complete a status determination for every freelance/contract position they hire for via a new client-led status determination process. While the full details of this process are yet to be published, as a contractor or freelancer, you have the right to question the status given to you and seek advice from accountants, umbrella companies, and solicitors if necessary.
Stay on top of these changes to avoid potential tax issues and remain compliant with the new legislation.
