Home Business Insights & Advice What do the changes in IR35 regulations mean for contractors?

What do the changes in IR35 regulations mean for contractors?

by John Saunders
29th Oct 19 4:50 pm

The rules on whether you are classed as an IR35 contractor or a sole trader will change as of April 2020. Anyone who works as a lone contractor within public sector organisations will already know – or they should do, at least – that they can no longer declare whether or not they are subject to IR35 accounting rules in their own right.

If you work as an independent IT consultant within a local authority, for example, then it will be the council themselves that decides if they consider your services to be worthy of IR35 status. As of 2020, the same rule will come in for contractors who supply their services to private sector companies, too. It is a big shake-up of the system, so what do you need to know about IR35 and contractor accountants?

Why use an accountancy service?

If you have completed your own bookkeeping as a sole trader or the owner of a limited company, then you may have been able to deal with your self-assessment returns without the need for an accountant.

Although many people find these sorts of services beneficial, large numbers of self-employed people are capable of completing their own returns themselves even if they might work in a more tax-efficient manner if they hired a professional to oversee them.

When it comes to IR35, hiring specialist contractor accountants can be even more advantageous. This is largely down to the complexity of the tax rules when it comes to IR35 contracting. Whether or not you can claim for equipment purchases or travel expenses means having a thorough understanding of all of the rules.

You will also be required to gain a unique worker ID to demonstrate to HMRC your status, especially if you have a primary and a secondary place of employment. Firms like Salient Accounting are geared up to help contractors with their tax returns and to ensure they are not caught out by any changes to the rules.

What are confirmations of arrangements?

In the past, contractors working for private businesses have been able to select their own status and justify this to HMRC of their own accord. Soon, your main engager at the business you work for will have to make this declaration on your behalf.

This means getting them to make the right declaration in your particular circumstances, of course. The trouble is that not all engagers have the right know-how to get this right, another good reason to seek your own professional advice.

When you are settling your tax status, you will need a confirmation of arrangements prior to the IR35 rule changes coming into effect. When your client provides this, it should settle the issue of whether your working arrangements fall inside or outside of IR35 regulations.

If you think the wrong declaration has been made, then expert guidance may be needed so that you can have the decision overturned as soon as possible. HMRC provides an online tool for this but IR35 contractor accountants are often better placed to help you resolve these sorts of disputes without, of course, embarrassing your client who may have made an honest error.

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