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Posted 27th June 2019

Will IR35 reforms kill off limited company contracting?

As the countdown continues towards IR35 reforms for the private sector, coming April 2020, many limited company contractors, and the agencies they work with, are busy becoming acquainted with the legislation and what these reforms will mean for their ongoing career.

What are the changes?

From April 2020 the responsibility for determining a contractor’s IR35 status will move from the contractor themselves to the end client or agency, which should ultimately identify those contractors operating under ‘false self-employment’.

These reforms were introduced into the public sector back in 2017, and following a number of issues, for contractors and agencies alike, a consultation decided that private sector reforms would be delayed until April 2020. It was also decided that it will only apply to medium and large businesses.

How will this impact limited company contracting?

One of the many repercussions of the introduction of IR35 reforms in the public sector, was that many contractors chose to turn away from their limited company if they were found to be within IR35, whilst others who believed they had been assigned the incorrect status, took agencies and end clients to tribunals to recoup lost income.

The public sector was fraught with issues from the outset of the reforms. This was due to a significant lack of preparedness on both the parts of the agencies and end clients, as well as the government in its lack of real guidance.

With more time provided for businesses to prepare, effective guidance promised by HMRC on making these changes, and greater awareness of the legislation and how businesses are required to change their processes, reforms to the private sector have the potential to be much more straightforward than its public sector predecessor.

Ultimately, the reforms have not been put in place to make operating a limited company an unattractive option but to identify those that are operating a limited company under false pretences. Therefore, as long as contractors and agencies are correctly assessing their status, and carefully choosing the contracts they work on any issues should be avoidable.

Here at Exchequer, we have been supporting our agency clients to prepare for IR35 reforms.  Contact our team today if you want to find out more about how we can help you to ensure compliance.

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