IR35: Frequently Asked Questions
As a communications, digital and marketing recruitment agency operating within the contractor market, we are having conversations on a daily basis with both contractors and clients regarding IR35. It is our ambition to make the transition as smooth as possible for our contractors and clients alike by sharing our knowledge on the upcoming changes and assisting all parties in navigating their way through any challenges that this may present.
What is IR35?
IR35 (also known as off-payroll working) is not a new piece of legislation and was initially introduced in April 2000. The purpose of the legislation is to ensure that any contractors operating in the same way as a permanent employee are being appropriately taxed, as well as the clients that are “employing” them.
Historically, it has always been down to the contractor themselves to make an assessment of their position and determine whether they are inside or outside of scope of IR35. However, in April 2017 the rules changed for the Public Sector, with the responsibility for determination (and the penalties for incorrect determinations) falling to the client rather than the contractor themselves. In October 2018, the Chancellor of the Exchequer announced in his Autumn Budget that IR35 changes would be extended to the Private Sector effective from 6th April 2020.
On 17th March 2020, Steve Barclay, chief secretary to the Treasury, announced that the legislation will be postponed until 6th April 2021. This is to combat the adverse economic impact of COVID-19. He stated:
"This is a deferral in response to the ongoing spread of COVID-19 to help businesses and individuals. This is a deferral, not a cancellation and the government remains committed to reintroducing this policy to ensure people working like employees but through their own limited company pay broadly the same tax as those employed directly."
Who is affected by IR35?
All contractors operating through a UK limited company are required to have an IR35 assessment for each role they take, irrespective of the location of work for any services provided after 6th April 2021.
If an assessment is made and the contractor is deemed to be outside of scope of IR35 for a specific role, then they can continue to operate in the same way as they have previously and IR35 will not impact them. However, it is importa