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IR35 is a set of tax rules introduced in April 2000 designed to tax people working in “disguised employment” through a personal service company as though they are employees. The concern was that under the then-popular “contractor” model, many people were claiming to be self-employed so that they and the hiring company were not paying National Insurance contributions, when in reality they were employees hiding behind a company structure.

From April 2017 the IR35 rules were changed for workers in the public sector. Responsibility for deciding the correct payments to be made and taxes to be deducted was moved from the employee/contractor to the hiring employer. In practice this meant that many employers started treating workers as employees by default to be prudent.

These IR35 changes were due to be extended to the private sector from 6 April 2020 for any companies meeting two or more of these three criteria:

An annual turnover of £10.2million or more
A balance sheet of £5.1 million or more
Staffing of 50 employees or more

Qualifying private companies would also have been required to determine the correct payments and tax deductions which would have squeezed the contractor market still further.

In a surprise turn of events however the Chief Secretary to the Treasury Steve Barclay announced on 17 March that the extension to private companies would be delayed for one year due to the coronavirus crisis. He made it clear that this is a delay not an extension, and the changes will now take effect from 6 April 2021.

If you would like further information about IR35 and how it will affect you or your business, please contact us today to arrange a free initial consultation with one of our expert employment law solicitors.