IR35 changes were at first due to be introduced in April 2020 but were delayed for a year due to the impact of the pandemic. IR35, formally known as off-payroll working rules are a tool deployed by HMRC to check if a contractor is genuine. In some cases, contractors are disguised as employees for the purposes of tax, but the IR35 changes are set to ensure everyone pays their fair share.
As Mr Paulin highlighted, there have been a number of legal cases recently, which could set a precedent for how IR35 will be dealt with in the future.
He continued: “I ought to add that one issue which occurred in 2020, and may be replicated this year, was the shift from formally self-employed contractors to umbrella companies under which the services were provided.
“Post the Uber case in the Supreme Court, and indeed a raft of similar cases, there is something important for medium and large businesses to bear in mind.
“That is that they do not seek to avoid the IR35 problem by incurring another problem of holiday pay claims from those provided by umbrella companies which don’t necessarily comply with the rules.
“It would be sad and unnecessary if medium and large businesses felt unable and unwilling to continue doing business with self-employed persons who operate via intermediaries.”
Mr Paulin stated he “could not emphasise enough” that no part of the new IR35 legislation would make it unlawful or problematic for businesses to contract with the self-employed or independent contractors.
While this may be the perception, he stressed it was important for all parties to ensure the process of change was undertaken as smoothly as possible – or Britons could face devastating consequences.
He added: “The effect of the legislation ought not to have a chilling impact on the market for self employed freelancers.
“If it does have such an impact, then that would be most unfortunate because self-employed freelancers are really needed more than ever before at this unique point in history.”
With the impact of the pandemic continuing to be palpably felt, it is clear many sectors of society will need further levels of support.
IR35 changes are likely to create growing pains for those involved, but it appears the issue is not totally insurmountable.
Mr Paulin concluded by expressing his confidence in the economy and its ability to bounce back from the crisis.
It could only do so, however, by taking into account the experiences of the self-employed and freelancers during this challenging time.
He said: “We remain a dynamic economy, supporting the self-employed and those who wish to set up businesses.
“We remain an economy supporting medium and large businesses doing business with smaller independent self-employed contractors and freelancers.
“And we remain an economy that needs to be organised in precisely that way.
“This new legislation if approached in a 21st century way, allows for the provision of corporate and legal services to get its arm around the whole problem.
“It will allow for businesses to continue their operation and continue pressing ahead. That message isn’t always received or disseminated, but certainly that is at the heart of what it is about.”
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