Reforms to off-payroll working rules in the private sector were due to take effect in April 2020 but were delayed as businesses grappled with the coronavirus crisis.
The changes will now go ahead in April 2021 and will apply to all medium and large private sector businesses (the rules already apply in the public sector).
How will the changes impact individuals and organisations within the construction sector?
The freelance and contract workforce has steadily risen in recent years, particularly within the construction sector under the Construction Industry Scheme. Latest ONS statistics show that around 38% of those working in the sector are self-employed.
The IR35 changes in April will be felt throughout the sector, for both employers and contract workers.
The IR35 rule changes are largely concerned with shifting the responsibility for determining tax status away from contractors trading through their own companies (‘personal service company’) and onto the businesses engaging the contractor. Currently, contractors operating through personal service company are responsible for determining their tax status, but from April this onus will be on medium and large businesses engaging the contractor.
Construction businesses will therefore have more considerations when engaging contractors, as making the wrong IR35 assessment may result in fines.
For details about the changes and how to decide whether a contractor falls within IR35 read this useful article HERE.
Construction bosses will need to decide if existing arrangements with contractors are sustainable or whether payments should be taxed as if they were employment income. Reassuringly, HMRC have said it will only apply the rules retrospectively in cases of suspected fraud or criminal behaviour so now is a really good opportunity for businesses to check the IR35 status of contractors to make sure they are compliant with the rules come 6 April 2021.
For any queries do not hesitate to contact James Greenhalgh: james.greenhalgh@cowgills.co.uk
Disclaimer
The information was correct at time of publishing but may now be out of date.
