It seems like only a few weeks since we were last reporting on changes to the IR35 regime. Well, from what we can tell, further change is now on its way.
In, out, in, out, shake it all about…
By way of a reminder, in simple terms, IR35 is the tax regime by which HMRC looks to identify and appropriately tax the income generated by consultants who provide their services to their ‘clients’ via a limited company. More specifically, HMRC wants to flush out those cases where the manner in which the services are provided looks suspiciously like employment, but where the payment of full employment taxes is being avoided by the use of a limited company. Until recently, the tax risk under the IR35 regime sat with the company through which the consultancy services were provided. However, with effect from April 2021, in many cases, that risk transferred from the consultant’s company to the ‘client’ purchasing the consultant’s services.
Last month, we reported on comments made by Liz Truss in which she promised to revisit the structure of the IR35 regime. True to her word, she and the Chancellor, Kwazi Kwarteng, have been swift to announce plans to reverse the recent changes to the IR35 regime, reverting to those rules which existed prior to April 2021. We await confirmation of the relevant measures. However, as things stand, with effect from 6 April 2023, the responsibility and liability for paying the correct amount of tax in cases such as these is expected to rest once again with the consultant’s company.
Given that businesses, accountants and lawyers have only just started to get their collective heads around the new regime, it’s a little frustrating to find ourselves in a situation where we are having to consider further changes. However, from an entirely selfish point of view, we are quite grateful for this development; it will almost certainly reduce the administrative burden which currently falls on many of our clients.
If you want to check where this development leaves your business, please get in touch.