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Private Sector IR35 Reform April 2020-2021

What are the IR35 off payroll reforms? The IR35 off payroll reforms came into force in the public sector in April 2017, and the Government announced in Budget 2018 that they would be rolling out these IR35 reforms to the private sector in April 2020. However due to Covid-19 the private sector IR35 reforms have now been delayed until April 2021.

We are compiling a list of companies and how they are going to manage contractors when the new legislation is implemented, you can view the list here - Company positions on IR35 private sector reform. If you have any information regarding your client's position on contractors let us know and we will add it to the list. All contributions will be treated in the strictest confidence.

What is IR35?

IR35 affects all contractors who do not meet HMRC’s definition of self-employment. The legislation was designed to stop contractors working as ‘disguised employees’, by taxing them at a rate similar to employment.

There are increased risks and responsibility that come with contracting, and lack of employee benefits, which is why contractors benefit from tax advantages. Therefore if you are deemed to be working as a contractor without accepting the increased responsibilities you will not be entitled to these tax advantages.

Private Sector IR35 Reform

What does IR35 private sector reform mean?

Under the current IR35 rules, contractors are responsible for determining their own IR35 status and the risk of non-compliance lies with them, however from April 2021 the legislation puts the burden of responsibility on the entity that pays the contractor. This is a new tax burden on all client-businesses engaging contract workers in the private sector, with the exception of small companies.

If a client decides IR35 does apply, the contractor business will be taxed at source exactly as if it were an employee. Although contractors impacted by this measure may have to pay tax like an employee, their employment status will not change, so they will not receive the rights and benefits that go with employment.

The changes were due to come into place in April 2020 and as it drew closer to this date many businesses such as Lloyds, Barclays, Tesco Bank, GSK, Transport for London, HSBC and the NHS made decisions about how they were going to engage with their contractors from that point onwards.

However in March 2020 the government delayed private sector IR35 reform until April 2021 due to the coronavirus pandemic.

You can keep up to date with all the latest news below, as well as getting yourself prepared for IR35 reform with our guides which cover a wide range of topics from the benefits of continuing to work inside IR35 via your limited company, to how to close your company compliantly.

To discuss IR35 reform with other contractors and experts in the industry please visit the ContractorUK forum.

Private Sector IR35 Reform Guides

Seven steps PSCs ought to take before April, rather than just waiting for the other shoe to drop.

Ten good reasons why you can’t afford to ditch your limited company as soon as a client deems you IR35-caught.

Play your cards compliantly if parting with a PSC, to deny HMRC of your final hand.

Tactics to tackle the potential cost of April 2021’s tax changes are a must. What are yours?

Part one of two on arguably the biggest question facing the UK contractor industry.

How a reformed IR35 spells change for your PSC and its contractual partners.

Find out which businesses have already made decisions about how they will engage with contractors next year.

Get to grips with your new obligations as temporary workers’ fee-payer or client.

What do the IR35 reforms entail and what are the implications for agencies? 

What can we learn from companies and contractors that have already come through the other side of public sector IR35 reforms.