IR35 tax reforms to go ahead

In March, amid the crisis being caused by Covid-19, the Government announced that the IR35 tax reforms were to be pushed back by one year, coming into effect on 6 April 2021. Now, despite the ongoing impact of the pandemic, it seems that the Government is still planning to go ahead with these reforms next year as planned.

Introduced in 2000, IR35 is an anti-tax avoidance rule that applies to all contractors and freelancers who do not fall under HMRC’s definition of being self-employed. The new IR35 tax reforms are intended to clamp down on tax avoidance by targeting contractors for companies who are, in practice, providing the same service as employees.

In March, Chief treasury secretary Steve Barclay, the MP for North East Cambridgeshire, said: “The Government remains committed to reintroducing this policy to ensure people working like employees but through their own limited company pay the same tax as those employed directly.”

This means that many contractors may discover that it’s no longer tax-efficient to operate as a limited company and decide to move to full time, or another type, of employment. If this is the case, they will need professional advice on the most tax-efficient way to wind up their company.

If you are a contractor and would like to know more about what these IR35 tax reforms will mean for you, then call us on: 01892 513515.