IR35 changes from April 2020 – will it affect your business?

It is fairly commonplace for some individuals to provide services to a business via their own limited company. But it has been a longstanding concern of the exchequer that there are many such relationships which are in fact “disguised employments”.

A disguised employment is one where, if the intermediary where removed, the nature of the relationship would be one of employer and employee. Since 2000 the rules known as “IR35” have created an obligation for companies that are in receipt of fees for a disguised employment to pay the PAYE and NIC.

What is changing?

In April 2017 the government decided that for organisations in the public sector, it would shift the obligation of assessing the correct tax status to the “end-user” of the services (rather than the person receiving the fee) and impose the obligation to deduct PAYE and NIC on the person who pays them.

From 6th April 2020, the rules which currently apply to the public sector will apply to the private sector as well.

What could this mean for my business?

You may be required to determine tax status for certain workers at specific times and inform them or their agents of your conclusion and why. In some cases, you may be required to deduct and account to HMRC for PAYE in respect of payments for their services.

Do these rules apply to organisations of all sizes?

No. These rules do not apply to businesses and other organisations who are “small”.

The definition of small for this purpose is taken from the Companies Act which provides that you will be small if you satisfy at least of these three requirements in your most recent accounting period:

  1. Annual turnover no greater than £10.2m;
  2. Balance sheet no greater than £5.1m; or
  3. Average number of employees no greater than 50
Read more in our IR35 fact sheet

What action is required now?

You should consider now what this change means for your business. If you have any concerns and would like to find out how we can help, please get in touch and speak to a member of our Business Tax team.