We have written a few blogs recently about the forthcoming changes to IR35 which will come into effect in April 2020, affecting contractors and freelancers who want to work as a limited company. Creative and tech freelancer platform, YunoJuno, has produced research showing that more than two thirds of freelancers are unaware of the changes that are approaching. From April 2020 the changes to IR35 which were implemented in the public sector in 2017 will also be replicated in the private sector. The law itself is a controversial one, because those who are judged to be within IR35 are taxed on a level with employees, but without receiving the associated benefits of employment such as holiday, sick pay or pension contributions. HMRC have been involved in a number of high-profile court cases regarding the definition of employees versus contractors.
Earlier this month, Talksport presenter Paul Hawksbee won a £140,000 court case with HMRC regarding IR35. HMRC argued that he should have been taxed as an employee, but the judge determined that he exerted control over his work – including writing his own jokes – and so was a contractor. The most high-profile court case to date over the issue was in March 2019 when Lorraine Kelly won her £1.2m case against HMRC after the judge concluded she was a ‘character’ played by the presenter. The judge agreed that as she did not receive a pension, sick pay or other benefits she was a freelancer as opposed to an ITV employee.
There is also controversy over the HMRC online tool for determining an employee’s status, known as CEST, as research has shown that it reaches the wrong conclusion in more than half of cases.
There are likely to be more updates concerning IR35 in the run up to April 2020 when the changes are enforced. At FKGB Accounting we are able to offer advice in determining employee versus contractor status so contact us to find out how we can help.
