- Changes to IR35 rules in the private sector
Currently, the law provides that where an individual personally performs services for another through an intermediary, and if the services provided are under a direct contract, the individual would be regarded for tax purposes as being employed by the end user who is the client. Presently, it is the responsibility of the intermediary (which is usually a personal service company) to determine whether IR35 applies.
From 6 April 2020, this will change.
The new rules will apply to medium and large businesses in the private sector only and largely mirror the changes that took effect in the public sector in 2017.
Under the new law, all contracts entered into or payments made on or after 6 April 2020, the onus will shift from the intermediary (the personal service company) in determining whether IR35 applies, to the end user (client) to make a decision on the status of the worker/individual.
In anticipation of this, it is essential that medium and large businesses carry out assessments to determine whether the new IR35 rules will apply to their contractors and review contracts and arrangements accordingly.
Small businesses will not be affected by this change.