0370 270 6000

Employer's beware: Government announces changes to IR35

30 October 2018

The Chancellor, Phillip Hammond, has just delivered his latest budget and with it, a significant change to the way liability for IR35 breaches will be dealt with for private sector companies from April 2020.

IR35 applies when a self-employed individual contracts with a client via a limited company. The client pays the limited company and in turn the limited company pays the individual. One of the benefits of this is that it typically attracts less tax. HMRC is therefore keen to make sure people using IR35 are genuinely self-employed and are not 'disguised employees' using the system to reduce their tax burden.

Presently, if the parties in the private sector get that 'wrong' the liability rests with the limited company. However, with effect from April 2020, mirroring a change that has already been implemented into the public sector, that liability will instead rest with the client for business of a certain size. This places responsibility on the client to make sure that the individual they are contracting with is genuinely self-employed. If not; they are exposed to potentially significant liability in respect of tax and Employment Tribunal claims.

This represents a further blow for employers following a recent string of cases where individuals were said to be employees or workers.

Now is an excellent time to audit your use of contractors generally, whether they operate via a limited company or not. This is not just a question of looking at what the contract says. This is important; but the 'day to day reality' of the relationship is the most important consideration.

Watch James Tait's coverage of the changes to IR35 in his In House Lawyer update.

Related opinions

BMA advises consultants not to accept less than the BMA minimum rate card for extra-contractual work

The BMA is advising all NHS / HSCNI consultants to ensure extra-contractual work is paid at the BMA minimum recommended rate and to decline offers of extra-contractual work that doesn't value them appropriately.

View blog

Rising wages ahead

In the Autumn Statement delivered on 17 November, rises to the National Living Wage and National Minimum Wage rates were announced, to take effect from 1 April 2023.

View blog

World Cup 2022 – how employers can avoid scoring an own goal!

The World Cup kicks off in Qatar on Sunday 20 November 2022, with the final taking place on Sunday 18 December 2022. Undoubtedly, this is a huge sporting event, and many employees will be keen to show their support for their favourite teams. However, due to the time difference, start times for the matches are between 10 a.m. and 7 p.m. UK time, which could have an impact on employers if employees who wish to watch the matches are scheduled to work.

View blog

Logistics firm fined for multiple failings leading to asbestos exposure

Logistics company Eddie Stobart has been fined £133,000, after a series of failures which took place whilst excavation work was carried out, exposing its staff to asbestos.

View blog

Mailing list sign up

Select which mailings you would like to receive from us.

Sign up