Changes due to IR35 from Spring 2021
The IR35 rule was introduced in 2000 to equalise the tax position between employees and individuals that provide their services, usually using a company (often called a Personal Services Company — PSC). The IR35 legislation aims to ensure a person acting as a contractor pays the same tax and national insurance as an employee if they are actually an employee. Currently, most contractors are required to determine their own status as employee or contractor. From 6 April 2021 the liability to determine this employment status will usually pass to the client/employer.
This change had been due to be introduced in April 2020 but this was delayed until April 2021 due to the Covid-19 crisis. It is expected that this change will lead to a significant number of “contractors” having to pay extra tax and national insurance as it is estimated that only 10% correctly determine their employment status.