Freelancers and contractors got a last-minute reprieve from the IR35 reforms a year ago, when the government opted to delay introducing them on 5 April 2020 amid the Covid-19 chaos. But the reprieve was only temporary, and for many businesses, concern is now growing about the potential impact of the changes when they come into effect early next month.
The reforms make businesses that use freelancers and contractors responsible for determining their tax status – whether they really are self-employed contractors, or whether they are effectively employees that should be paid through the PAYE tax system. Many freelancers and contractors have received lengthy questionnaires from clients in recent weeks, and fear they could face a loss of income or higher tax bills following the changes.
Research published by the Association of Independent Professionals and the Self-Employed (IPSE) this week suggested as many as 50% of members would stop contracting in the UK from 5 April onwards, unless they can secure contracts unchanged from their current arrangements.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
This will require clients to certify them as outside the scope of the IR35 rules, but the tests for determining this are subjective rather than definitive. Broadly, HM Revenue & Customs is focused on working relationships. Where contractors and freelancers retain control over how and when they work, where they can delegate the work, and where the client is not obliged to give them work, they are likely to escape IR35. But all clients have to make their own assessments of each freelancer and contractor they use. Those that have not heard from clients may now need to make inquiries or risk an unexpected tax surprise. In IPSE’s research, one in four contractors said their clients were either uncertain or had made no indication of what they would do in response to the IR35 changes.
-
Christmas at Chatsworth: review of The Cavendish Hotel at BaslowMoneyWeek Travel Matthew Partridge gets into the festive spirit at The Cavendish Hotel at Baslow and the Christmas market at Chatsworth
-
Tycoon Truong My Lan on death row over world’s biggest bank fraudProperty tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
-
Business rates relief to be slashed – how to cut costsLabour has promised to reform business rates, the corporate equivalent of council tax
-
Rouble hits two-year low against the dollar – what does it mean for Russia's economy?New US sanctions have plunged the rouble to its lowest level since 2022. Why are investors spooked and how will this affect Putin's economy?
-
Has Javier Milei succeeded in transforming Argentina's economy?Javier Milei won an election last year on an “anarcho-capitalist” platform, promising to take a chainsaw to the overbearing and bloated state. How’s it going?
-
Brazil booms – but why do investors remain wary?Brazil is booming, but you wouldn’t think so from looking at the stock market. What's behind the market paranoia?
-
How small businesses can take advantage of new sources of financeSmall business Banks have reduced lending to small companies, but there are alternatives as the finance market continues to evolve
-
Do we need central banks, or is it time to privatise money?Analysis Free banking is one alternative to central banks, but would switching to a radical new system be worth the risk?
-
Will the R&D tax credit change in the Autumn Budget?Will Labour revise state help designed to foster R&D in the upcoming Autumn Budget?
-
How to improve economic output using the supply-side approachBoosting potential economic output through public investment is crucial, says David C. Stevenson
