IR35 & Brexit – Are You Affected?
Contractors – are you affected by IR35 and Brexit?
With Brexit and the off-payroll reforms set to cause big legislative changes throughout 2021, it’s more important than ever that you stay up to date with HMRC guidance to ensure you’re always working compliantly.
As a contractor, you need to know which of the new laws will apply to you and how they’ll affect the way you work. This can become even more complicated if you work with companies overseas.
Monitoring and understanding the new changes in legislation will enable you to prepare yourself accordingly so you, your agency, and your end hirer don’t get caught out by HMRC.
The off-payroll rules, set for 2021, apply if your end hirer is in the UK or has a permanent establishment in the UK on 5th April 2021 (before the start of the new tax year: 6th April 2021 – 5th April 2022). In practical terms, a ‘permanent establishment’ would refer to a factory or other premises, branch office, or a representative, permanently based in the UK.
If your end hirer has no UK presence whatsoever, but you (the contractor) are a UK tax resident, then you and your agency don’t need to worry about the off-payroll reforms for this specific contract. You can simply apply the old IR35 rules, as you do today, and continue to work compliantly.
In general, if you’re not a UK tax resident, then it is most likely that the new off-payroll rules won’t apply.
The location of your recruitment agency is of very little relevance to the application of the IR35 reforms. The main indicator as to whether the off-payroll rules will apply to your contract is the location of your end hirer.
If, as a UK resident contractor, your end hirer is, for example, an overseas business with a permanent UK office, and either accidentally or purposefully, does not apply the new off-payroll rules (i.e. does not do a status assessment and/or does not issue you with an SDS), then HMRC will say they have not complied. This would mean your end hirer (not your recruitment agency) would be liable for the tax and National Insurance Contributions owed.
IR35 reforms will be largely unaffected by Brexit. However, you may be impacted by Brexit if you contract your services across Europe. This is because working in European countries may be made more difficult by the new necessity to hold a VISA to work compliantly.
Nevertheless, unless you or your end hirer is based abroad, you should continue to prepare for the new IR35 reforms in the UK so that you’re ready by April 2021.
Click here to visit our IR35 Hub for Contractors to find out more or get in touch with one of our IR35 experts for advice on contracting abroad and IR35 compliance.