Your questions on tax answered by Hastings chartered accountants and business advisors Ashdown Hurrey

Question: I am a painter and I set up my own limited company last year. I have been carrying out work for the same property maintenance company for several years, and before the company as a sole trader. Recently they mentioned that off-payroll working (IR35) may affect me. Will this apply to me?

Answer: On March 17, 2021 it was announced that the changes to off-payroll working also known as ‘intermediaries legislation’ would be delayed until April 6, 2021. This is a response to the ongoing spread of COVID 19 to help businesses and individuals.

The government stressed that it remains committed to reintroducing this policy and that it is a deferral, not a cancellation. The information below will therefore be applicable from April 6, 2021. However it is important to consider that this information may change as further information is made available by the government.

IR35, also known as intermediaries legislation, is a tax law which has been issued by HMRC. This is designed to prevent independent contractors from benefiting from favourable taxation by providing services through a limited company rather than directly as an individual.

If you are a permanent employee of a business, receiving a salary and making National Insurance and tax payments at source through a PAYE scheme, then you will not have to worry about IR35. Nor if you are a temporary employee working through a staffing agency.

As a self-employed individual, you were taxed on your trading profits each year by completing a tax return and you made National Insurance Contributions alongside this. If you worked for other businesses then it was their responsibility to determine whether you should be employed through their PAYE scheme rather than you invoicing them.

Now you are a contractor trading through a limited company and working for another business. Until now the onus has been on you to ensure you pay the correct amount of tax and National Insurance.

However, there are new IR35 regulations coming into force from April 2020 that mean large-sized private sector organisations will have a responsibility to determine whether contractors like yourself should in fact be employed.

Therefore, your customer may have to take you on as employee if they wish to use you. They will need to provide you with a determination informing you of their decision in the coming weeks and by 6 April 2020 at the latest.

There is an employment status test that can be found on www.gov.uk. It is important you understand your employment status and how the test works, as responsibility can fall on you to ensure you pay the correct tax. However, seeking professional advice is also important.

All cases must be judged on their own merits and the actual conditions of the work carried out will need to be taken into account, as each set of circumstances may be different.

If you would like to discuss your circumstances in greater detail, Ashdown Hurrey can advise on this matter in addition to other tax, accountancy and business matters. Contact Gemma Newstead on 01424 720222 or email her at [email protected].