If you are a freelancer or contractor working almost exclusively for one company, there’s a significant change on its way which could affect you.
New tax regulations – called IR35 – come into force on April 6 and could change the way you are regarded by the Inland Revenue.
Up until now, self-employed contractors have been responsible for sorting out their own tax and National Insurance payments.
That has brought some benefits – as well as the annual headache of completing a tax return and making sure it gets to HMRC in time to avoid any penalties – which is why the taxman now wants to ensure everybody is employed on the same basis.
So from April, under certain circumstances, responsibility for deciding if you are self-employed or actually an employee will pass to the company hiring you.
Two main types of workers may be affected by IR35:
· Independent contractors — People who are self-employed and work through a limited company or similar business.
· Freelancers — those providing their services on an "as needed" basis.
As ever, the guidelines for who will be impacted by IR35 are not entirely black and white. But a good guideline is that IR35 is only likely to affect a contractor or freelancer if they would otherwise be treated as an employee by the companies they work for.
So, things which might make HMRC decide you should be classed as an employee under IR35 include:
· Your client controls your workload, how you do it and when and where.
· There is nobody at the client’s company who could take your place and do your work.
· You are obliged to accept regular work from your client as part of your agreement.
· You are an essential part of your client’s organisation.
· Your client provides equipment and resources to enable you to do your job.
Should you be found liable under IR35 you will almost certainly have to pay more tax – possibly backdated for as long as six years. You might also face penalties and interest charges as well.
The bad news is, there is not a lot you can do about it. If you think you will be caught under IR35, it makes sense to talk to your client and move onto a standard employment contract as soon as possible.
And if you have any concerns at all about the impact of IR35, do get in touch with us as soon as possible. You can use the button on the website to arrange a free consultation to get things started.