The Finance Bill has been passed, which means that IR35 tax legislation on disguised employment will be extended to the private sector from next April.
The IR35 legislation will be extended to the private sector from next April after the House of Commons passed the Finance Bill last night and an amendment aimed at delaying the roll-out was defeated.
This means that, from next April, private sector organisations employing contractors through limited companies will have to decide whether these workers are operating inside or outside of IR35. If a contractor is considered to be inside IR35, HMRC will deem this to be a ‘disguised employee’, and therefore subject to the same tax and NI deductions as the permanent workforce. The changes have already been implemented in the public sector and there has been a big campaign by contractors who are worried that employers will choose to apply it in a blanket fashion and that many contractors will be forced out of business as a result.
Dave Chaplain from ContractorCalculator said: “It is very disappointing that after four years of campaigning we have not achieved the primary aim of stopping this legislation. We, and our 4,000 campaigners, did everything we could – and the Lords Report, from their inquiry into the so-called reforms, accurately detailed the damaging effect these changes will have on the UK’s flexible workforce. We are delighted that MPs tabled amendments to the Finance Bill, to prevent the damage, but sadly our MPs chose not to back them in sufficient numbers.”
He added that the next year should be spent on building confidence with employers that they can continue to hire freelancers without falling foul of IR35.
“Over the next year we will be seeing more clarity from the courts, as binding authorities are released – and these are likely to favour the self-employed and provide a legal bedrock upon which firms can compliantly hire contractors, without fear of later repercussions,” he said. “Provided firms work with specialists in this field, they should have nothing to fear.”