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New IR35 rules likely to catch everyone, experts say

Now that 6 April has come and gone and industry boffins have had a chance to ruminate over the changes, the consensus is we’re all doomed.

The new IR35 rules that were published in the March Budget announcement are, for lack of a better word, deliberately targeted at contractors who work through personal service companies (PSCs) or limited companies. In a move that’s ostensibly designed to clamp down on tax avoidance, the new regulations are so broad that contractor accountants, tax experts, and contracting trade industry bodies have all come out of the woodwork to condemn and criticise – and honestly I can’t blame them one whit.

In fact, many experts simply assume that when it comes to the public sector, contractors working through PSCs are simply going to be assumed to be within IR35 without any sort of even cursory examination. These experts feel that this places an undue burden on contractors themselves to prove otherwise – and that it sets the bar so high to prove they’re not subject to IR35 that it’s effectively impossible to do so.

Recruitment organisations in particular are up in arms, as the burden it places on them to engage contractors to make the IR35 determination themselves is particularly onerous. The Association of Professional Staffing Companies (APSCo) has been quite vociferous in its condemnation of the new regulations. With the possibility that these new IR35 rules will eventually be applied to the private sector as well sometime in the future, almost everyone is alarmed and concerned. To its credit, Her Majesty’s Revenue & Customs says there’s no plans on the part of the Government to broaden the new rules to the private sector, though I’m sure most individuals and companies are taking HMRC’s statements with a very large grain of salt.

For now, there is some respite. Since the umbrella company model is PAYE, and thus exempt from IR35, PSC contractors can go that route if they want to avoid having to muck about with all that. Of course, if you became a PSC contractor to get a break on your taxes, going PAYE isn’t going to help you out in that regard. However, if the writing on the wall ever becomes a reality, we’re all going to end up under PAYE before long as the Government seeks to eliminate one of the many advantages of working for yourself instead of as a traditional employee. What else is new?

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