IR35 – could the taxman’s new online “tool” damage your health?

Changes to the IR35

Somewhere in the inner circles of hell is a place where forlorn spirits are being tormented with the changes to the IR35 regime that are being introduced this April.

The changes are essentially a tax grab. They are complex, but basically the taxman wants to stop contractors working as if employed, which has major tax and NI benefits for the contracting organisation.

The big change that happens on 5th April is that the onus for determining whether IR35 rules apply will shift from the contractor to the organisation using the contractor. Initially this will be for public sector bodies only but it will undoubtedly be rolled out to the private sector in due course.

So far, so good.

But if your business hires contractors you now have to make sure they really are deemed to be contractors under the terms of the IR35 guidelines.

If you don’t, you could get fined 30% of any unpaid tax (if accidental) or 70% (if ruled as deliberate).


And there’s good news and bad news.

The good news is that in a bid to make things simpler, HMRC has launched an online tool to help employers determine whether someone qualifies as an employee or a contractor.

The bad news is that this “tool” is complete rubbish (and we are not going to link to it). Instead of applying case law to your answers it applies HMRC’s own arguments instead – especially about ‘Mutuality of Obligation’. And HMRC has already lost 5 out of the 10 cases that have relied on the importance of MOO.

So you could easily make a false declaration just by using a tool HMRC has provided – and end up paying a hefty fine as a result!

Talk to our experts today

Here at THP we are happy to give you more detail about IR35, but we strongly advise you talk to us before you make any IR35 declarations.

And whatever else you do, don’t go searching for that tool – it could be the most expensive mistake you make this year!

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