Somewhat surprisingly, despite IR35 reform in the private sector being just days away, research reveals that search interest in IR35 has plummeted since the delay to these controversial changes was announced last year.
The data, analysed by specialist insurer Markel Direct, shows that the search volume for IR35 topics has dropped by 71% since last year’s announcement that the legislation change would be postponed due to the COVID-19 pandemic.
So, to help ensure contractors are well-prepared ahead of the 6 April deadline, Paul Mason, Head of Tax Partnerships at Markel, has answered the most asked questions about IR35 according to search engine data.
From ‘how to prepare’ to ‘how much worse off will I be’, this article details Paul’s answers to guide contractors navigate the looming changes.
Start by checking your engagements:
The IR35 legislation, also known as off-payroll working, applies to contractors (who undertake the work itself), end clients (who make the status decision) and fee payers (who can be end clients but are often agencies where they sit above the contractor’s company in the supply chain).
In a sentence, IR35 reform will see the end client will become responsible for determining IR35 status and, assuming all legal obligations have been met in the supply chain, the fee payer will have the IR35 liability.
Yes. Whilst the IR35 rules are changing dramatically in April 2021, HMRC can still open a retrospective enquiry into your tax and National Insurance Contributions, which could go as far back as four or six years depending upon the circumstances. HMRC have clarified that they will undertake such enquiries if they suspect fraud or criminal behaviour.
IR35 stands for ‘Inland Revenue 35’, which was the name of the press release that first announced the anti-tax avoidance legislation in 1999. The correct term is the Intermediaries Legislation – the contractor’s limited company being the intermediary.
Calculating how much worse off you will be financially if a contract is deemed to be ‘inside’ IR35 depends on your individual circumstances.
As an example, a contractor earning £75,000 a year could expect to take home £52,546.32 in retained income if they are ‘outside’ IR35. If they are caught ‘inside’ IR35, the contractor might take home £45,563.95 – so would be almost £7,000 worse off.
Additionally, if your engagement is ‘inside IR35’, any subsistence costs will have to come out of your take-home pay, which means that you could be considerably worse off than £7,000.
Again, it depends. If the contractor is a UK taxpayer, IR35 must still be considered even if they are working abroad or being paid in a different currency. Who determines the matter will depend upon whether the end client has a UK presence. If the end client has no presence in the UK, the contractor must assess their own IR35 status.
Contractors can’t legally avoid IR35 if they are providing services through a limited company. Your end client will make the decision or, if you are engaged by a small company, it is your responsibility. That doesn’t mean whether you want to apply IR35, but whether it should apply.
To find the answers to the most searched for questions about IR35, head to the Markel Direct IR35 hub.