IR35 has been around on the Statute Books since April 2000. However, It was first mooted by the Inland Revenue (HMRC) as far back as March 1999 when they released a press release following the Budget Statement, outlining the Governments intentions to clamp down on the growing use of Personal Service Companies by contractors who were trying to exploit the fiscal advantage offered by a corporate structure.
After a consultation period, the Inland Revenue published a subsequent press release on 23rd September 1999 which outlined three changes to the original proposed legislation. The first was on how employment status would be determined, the second was putting the onus on the intermediary to apply the new rules andnot the client and the third was that the intermediary was responsible for applying PAYE and NI on all earnings from relevant engagements, after deducting a 5% expense and pension allowance.
Following the 2015 Summer Budget, the Government released a discussion document because they believed that IR35 was ineffective and that non-compliance with the Legislation was widespread. This raised the possibility that, for the first time, the onus of determining status could be put onto the client.
Then on 16th March 2016 the Government announced that there would be a clampdown on so-called off-payroll working within public sector organisations. Draft Legislation was published in December 2016 which was subsequently enacted in April 2017. This change to IR35 now saw the client being responsible for determining status and not the intermediary and the 5% Expense rule being removed. The same rules will now apply to the Private Sector from 6th April 2020.
We give below a direct extract given by HM Treasury in a Policy Paper on the Off-Payroll working Rules which is dated 29th October 2018:
To increase compliance with the existing off-payroll working rules (often known as IR35), medium and large organisations in all sectors of the economy will become responsible for assessing the employment status of individuals who work for them through their own limited company. The reform does not introduce a new tax or apply to the self-employed, who are outside the scope of the existing rules.
The reform was introduced in the public sector in 2017. At Budget 2018, the Government announced that it would be introduced to other sectors from April 2020, giving organisations time to adjust and prepare. Outside the public sector, the reform will not apply to the smallest 1.5 million organisations, minimising their administrative costs.
Following a further consultation in Spring 2019, the Government has published its response to the submissions received, confirming the detailed design of the reform and the obligations on different parties. It has also published the draft legislation for the reform.
It is fair that two individuals working in the same way pay broadly the same Income Tax and National Insurance Contributions (NICs), even if one of them works through a company. The off-payroll working rules were introduced in 2000 and require that individuals who work like employees, but through their own company, pay similar taxes to other employees.
IR35 has been around on the Statute Books since April 2000. However, It was first mooted by the Inland Revenue (HMRC) as far back as March 1999 when they released a press release following the Budget Statement, outlining the Governments intentions to clamp down on the growing use of Personal Service Companies by contractors who were trying to exploit the fiscal advantage offered by a corporate structure.
After a consultation period, the Inland Revenue published a subsequent press release on 23rd September 1999 which outlined three changes to the original proposed legislation. The first was on how employment status would be determined, the second was putting the onus on the intermediary to apply the new rules andnot the client and the third was that the intermediary was responsible for applying PAYE and NI on all earnings from relevant engagements, after deducting a 5% expense and pension allowance.
Following the 2015 Summer Budget, the Government released a discussion document because they believed that IR35 was ineffective and that non-compliance with the Legislation was widespread. This raised the possibility that, for the first time, the onus of determining status could be put onto the client.
Then on 16th March 2016 the Government announced that there would be a clampdown on so-called off-payroll working within public sector organisations. Draft Legislation was published in December 2016 which was subsequently enacted in April 2017. This change to IR35 now saw the client being responsible for determining status and not the intermediary and the 5% Expense rule being removed. The same rules will now apply to the Private Sector from 6th April 2020.
We give below a direct extract given by HM Treasury in a Policy Paper on the Off-Payroll working Rules which is dated 29th October 2018:
To increase compliance with the existing off-payroll working rules (often known as IR35), medium and large organisations in all sectors of the economy will become responsible for assessing the employment status of individuals who work for them through their own limited company. The reform does not introduce a new tax or apply to the self-employed, who are outside the scope of the existing rules.
The reform was introduced in the public sector in 2017. At Budget 2018, the Government announced that it would be introduced to other sectors from April 2020, giving organisations time to adjust and prepare. Outside the public sector, the reform will not apply to the smallest 1.5 million organisations, minimising their administrative costs.
Following a further consultation in Spring 2019, the Government has published its response to the submissions received, confirming the detailed design of the reform and the obligations on different parties. It has also published the draft legislation for the reform.
It is fair that two individuals working in the same way pay broadly the same Income Tax and National Insurance Contributions (NICs), even if one of them works through a company. The off-payroll working rules were introduced in 2000 and require that individuals who work like employees, but through their own company, pay similar taxes to other employees.
