The chancellor in his 2018 budget announced that tighter tax rules for those working in the public sector will be extended to those working for private firms. The rules in the public sector have almost eliminated the use of personal service companies.
Among those affected will be IT contractors, engineers and consultants.
The crackdown is the biggest revenue-raising measure in this year’s Budget.
Critics accused the chancellor of hurting thousands of people who are self-employed, and burdening businesses too. But the Treasury insisted that the reforms would not affect anyone who was genuinely self-employed.
If the way you work is similar to an employee of that business, you should pay income tax, and National Insurance (NI) at the 12% rate.
Up to now many contractors in personal service companies have been paying less tax and NI.
But from April 2020, larger businesses – like banks – will take on responsibility for deciding which contractors will need to pay more tax and NI. If someone is deemed to be an employee, the firm using the contractor will also have to pay NI for the first time.
Note: That because of the Covid-19 Pandemic, HMRC have delayed the introduction of the new rules until April 21.
Comments above are based on a BBC website dated 30/10/18
Further blogs will be provided when the new rules become clearer
Also attached is an update on IR35 prepared by Francis Clark (March 19)