Off Payroll Working – The Death of the Consultant?

IR35 as it is more commonly known, came in to force in April 2000 as a means of cracking down on unscrupulous intermediaries who were abusing the tax system, in turn reducing their tax and national insurance liabilities.

Fast forward to April 2020 and this same legislation that was originally aimed at cracking down on the few, now stands to affect an estimated 170,000 one person businesses in the UK who provide services to medium and large sized enterprises within the UK private sector.

IT, Engineering and Security consultants amongst others, who provide services via a limited company, often referred to as a personal service company (psc), are at risk of falling within the legislation which will shift responsibility for determining the status of any workers from the provider, to the fee payer, through the use of contract assessments and the HMRC CEST tool.

If found to fall within the legislation, providers face up to a 32% deduction for Tax and NICs meaning that a £7,200 invoice could be reduced to just over £5,500. Fee payers will become liable to Employers NIC, and P45s and P60s must all follow, strongly mimicking the traits of an employee/employer relationship without the benefits and protection it provides.

Determining employment status is about who has control of the contract, hours and tasks amongst other strict criteria, leading to the million-dollar question small business owners are left to ask; without my business, would I be an employee?

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