Tax hikes arrive but IR35 remains freelancers’ biggest fear

Regardless of the raft of tax hikes launched this month, on the two-year anniversary of personal sector IR35 reform, the laws nonetheless tops contractors’ issues

The arrival of the 2023/24 tax yr and with it an array of tax will increase impacting freelancers and contractors doesn’t detract from the truth that the IR35 laws stays these staff’ stand-out concern, analysis from IR35 specialist Qdos reveals.

Regardless of the rise to Company Tax (rising from 19 to 25%), the discount of the additional-rate revenue tax threshold (from £150,000 right down to £125,140) and the slashing of the tax-free dividend allowance (£2000 right down to £1000), the IR35 guidelines are nonetheless thought of by contractors as the most important menace to their enterprise.

A couple of in three of greater than 700 contractors surveyed by Qdos view IR35 as the problem which has probably the most potential to influence their enterprise negatively. That is forward of issues over the price of residing and the raft of tax will increase launched for the 2023/24 tax yr (25%).

Reform to the IR35 guidelines had been launched within the public sector in 2017 and within the non-public sector in 2021. The adjustments noticed freelancers’ shoppers turn into liable for figuring out these staff’ tax standing, until the freelancer is engaged by a small firm.

In final yr’s Mini-Funds, it was introduced that the off-payroll working guidelines could be repealed efficient from 2023/24 tax yr, earlier than the newly appointed Chancellor, Jeremy Hunt reversed this determination. Simply 7% of contractors surveyed by Qdos are ‘assured’ that the reform will likely be repealed in future. 43% are ‘by no means’ assured and 39% are ‘not very assured’.

On the two-year anniversary of the roll out of reform within the non-public sector – and 6 years for the reason that adjustments had been enforced within the public sector – Qdos CEO, Seb Maley mentioned: “The tax burden on the UK’s smallest companies is spiralling but it’s IR35 which worries freelancers and contractors most – that is saying one thing. The federal government’s heavy-handed manner of tackling IR35 compliance has understandably put freelancers and their shoppers on edge.

“HMRC has a scattergun strategy to IR35 compliance, pursuing instances for years just for it to be discovered that the freelancer has carried out nothing flawed. Take Gary Lineker, who HMRC wrongly believed owed £4.9m in tax. The identical goes for Adrian Chiles, who had a £1.7m IR35 invoice hanging over his head.

“With the off-payroll guidelines in drive, HMRC is ramping up its compliance exercise amongst companies. And if the tax workplace’s policing of IR35 amongst freelancers and contractors is something to go by, compliance should stay a precedence for organisations partaking these versatile staff.”

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