IR35 legislation refers to the “disguised employment” rules which have been in place for many years but are back in the news because HMRC have been successful in a number of high-profile cases, including that between them and Christa Ackroyd’s own company. She was a presenter at the BBC, who claims that the BBC insisted that she work through her own company rather than be employed directly by the BBC.HMRC are now seeking lost taxes from her company, not the BBC.
In the past, HMRC have only been able to go after the “employee” for the lost national insurance, rather than the “employer” , leaving small companies exposed to having to repay substantial amounts of tax if the HMRC are successful in their arguments, while the “employer” appears to get off unscathed.
As with the reforms already made in the public sector, the changes announced in the budget will shift the responsibility for implementing the IR35 status assessments from the individual “employee” to the “employer”, so in this case shifting responsibility to a larger organization from a small one. The Government expect that this will bring in additional revenues of £3 billion over the five years to 2023/24.
The proposal had been widely predicted and many contractor’s will be relieved that the implementation date has been set at April 2020 rather than a year earlier as anticipated. The exemption to small and medium size businesses will also be welcomed but it will lead to additional complications in implementation.
Anyone working through their own small company working mainly for one organization and concerned that they are “disguised employees” still needs to take advice in case they are exposed in the event of an HMRC enquiry.