What Is IR35?

We’ve broken down exactly what IR35 is for you…

Everything You Need To Know

IR35 was first introduced in April 2000, a UK tax legislation designed to identify contractors and businesses who were avoiding paying the appropriate tax by working as ‘disguised’ employees; or, are engaging workers on a self-employed basis to ‘disguise’ their true employment status.

Abuse of self-employment has been a problem for the government for decades – losing out on employer’s National Insurance based on 13.8% of the worker’s gross salary.

In April 2017, new legislation came into force directly affecting the public sector, those working in medical, health and education. Knowing how vast the private sector was, HMRC scheduled off-payroll changes to encompass remaining contract workers from 6th April 2020.

With the world in turmoil over CoVID and impact on the economy, tax and recruitment experts, along with employers in the private sector were keen to see the new legislation delayed or scrapped altogether.

Following the Finance Bill held on 22nd July 2020, it was evident that the government wanted to see it through. Royal Assent was granted for the changes to be enforced, confirming its eventual introduction on 6th April 2021. Even COVID could not stop the new legislation and the Government were going to get their way in making these reforms, regardless of the distain from contract workers and businesses.

Who do the new rules apply to?

The new rules apply to medium to large companies who fall under these criteria, where at least two apply:

– Annual turnover of over £10.2 million
– Balance sheet total greater than £5.1 million
– More than 50 employees