Could IR35 affect the private sector?

Monday 4 December 2017

Most self-employed business people will be aware of the recent changes to IR35 legislation in the public sector. Public sector companies - and the contractors doing work for them - are now under increased scrutiny to make sure the worker is being taxed properly, with many people finding they don't count as freelance for this purpose.

If a self-employed individual finds themself 'inside IR35', it means their contract with whoever they're working for is too much like standard permanent employment to count as freelance work. This usually means an increased tax burden for the contractor.

The rolling-out of this legislation has been controversial, to say the least. Self-employed advocacy groups have talked of how it is driving talented freelancers away from certain industries due to the risk of being taxed extra for being inside IR35. This in turn has led to certain sectors losing out on important skills and experience.

Unfortunately, it might not just be public sector firms who are affected. Chancellor Philip Hammond has included a sentence in the recent Budget document about tackling "non-compliance" with IR35 in the private sector as well. Given that there are approximately 5.5 million private businesses in the UK, this could be a monumental task.

This announcement has worried many people, as it could have a negative effect on freelance work throughout the UK. Writing for Business Advice, Julia Kermode - chief executive of The Freelancer & Contractor Services Association (FCSA) - warned that extending IR35 to the private sector could severely harm the UK economy.

"Simply put," she said, "if the government makes it too difficult or too expensive for businesses to access the workforce and talent they need within the UK, then why should they do business here?"

Of course, it's not all doom and gloom - far from it. One very positive element of the Budget document is the fact that the government is committing to a "careful consultation" on the potential to roll out IR35. The FCSA said that this was "fantastic news" and "shows that the Government has finally listened to FCSA’s many concerns regarding the public sector changes already in place".

Furthermore, while many self-employed workers have avoided public sector contracts for fear of being caught by IR35, it is something that can be worked around. Essentially, you have to make sure that you have all the freedoms that a self-employed worker should in terms of choosing when to work and things of a similar nature.

If you are worried about how to manage the impact of IR35, Brookson can provide you with IR35 expertise that will help you navigate this area.  Get in touch here to find out more.

By Victoria McDonnell

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