There is a lot of buzz around the new IR35 legislation that is due to be introduced in April 2020.
IR35 is being introduced to tackle a particular form of perceived tax avoidance, whereby individuals may seek to avoid paying employee income tax and national insurance contributions by supplying their services through an intermediary and paying themselves in dividends.
The new rule will mean that payments made to personal service companies will be treated as payments of employment income on which the client (or third-party intermediary) must account for tax. Essentially, the responsibility for IR35 tax compliance will shift from the personal service company to the client or third-party intermediary.
The legislation will apply to medium and large companies in the private sector from April 2020.
Companies who currently engage with contractors through service companies should consider reviewing the format of these relationships to determine whether changes need to be made in light
The rolling out of IR35 in the public sector demonstrates the importance of preparing for these changes as early as possible.