IR35 Crackdown on Contractors?

Contractors are facing a major crackdown on IR35 that will introduce a new test forcing clients to become responsible for compliance and driving 90% of Personal Service Company (PSC) users onto company payrolls. The IR35 – Intermediaries Legislation was introduced in 2000 to tackle so-called ‘disguised employment’, where individuals use their own limited companies to carry out professional services, but operate in a manner more akin to a traditional ’employee’.

Reports in two national newspapers agree that the Chancellor, George Osborne, is behind the changes to be announced on 25 November 2015 in the Autumn Statement that are designed to raise an additional £400m a year in extra income tax and National Insurance Contributions (NICs). One newspaper reported that around 100,000 personal service company people will be affected, being obliged as consultants to move onto a company payroll if they work for a business for more than one month.

The Mail Online’s deputy political editor Jason Groves is reported as saying:

“The Chancellor is now looking at shifting the burden on to employers, and introducing new guidance to make it much clearer what constitutes employment. In future, anyone working for an organisation for more than a month will normally be considered to be an employee.”

The Contractorcalculator CEO commented:

“That these announcements are shortly before the Confederation of British Industry’s (CBI) annual conference is no coincidence. The IR35 measures revealed in media reports suggest that clients will suddenly face paying employers’ NICs for their contingent workforce, in addition to all the extra costs of employment such as holiday, sick pay and other perks. I just can’t see big business agreeing to these measures. Businesses, rather than the individual, would be responsible for overseeing the rules. An agency would be responsible if they provide consultants to businesses.”