A recent 121 blog looked at the changes to IR35 tax rules and the disruption the rules have caused in the public sector. Now HMRC is saying that the rules could be extended into the private sector as early as spring 2018.
The amendments to the IR35 tax system for the public sector came into effect this April and since then, public sector contractors have had their tax status determined by the organisations hiring them. Those deemed to fall inside the IR35 regime are treated as employees for tax purposes and automatically have their tax and national insurance contributions deducted at source, resulting in significant “pay” cuts for many.
If the impact of the introduction of the rules in the public sector is anything to go by there is a risk for employers that contractors will raise their fees.
Research released in April revealed that the public sector could face a recruitment problem with contractors, with 85% of contractors surveyed threatening to stop working for the public sector if they were caught under IR35.