HMRC’s guidance on the new IR35 regime for the private sector is light on information for contractors. If you’re a contractor personally providing services, what steps should you take before the new regime applies?

New guidance. HMRC has published new guidance regarding the major changes to the IR35 regime for private sector contracts which take effect on 6 April 2020 (see The next step ). Unfortunately, it doesn’t clearly explain what will happen on 6 April if you’re the one providing services personally through your limited company, an agency, etc.

Understanding the guidance. HMRC’s guidance refers to you as a “worker” if you’re the person actually doing the job. Your company, partnership or other organisation that bills for the work you do is an “intermediary” and the business etc. you’re working for is the “client”. From 6 April clients must decide if the new regime applies to them. If it does they must review the terms and conditions on which you provide your services and decide whether, if you worked direct rather than through your company, you would be an employee instead of a freelance contractor.

Employee status. If the client decides you would be an employee it will deduct tax and NI for all future payments it makes to the intermediary, e.g. your company. While it must inform you of its decision to do this, it doesn’t have to until it pays you. This means the first you might know about it is when you are paid less than your company billed.

Tip. For current and new contracts that will run until 6 April 2020 or later, ask the client to carry out a review well before that date. HMRC has a “check employment status for tax” (CEST) online tool (see The next step ). However, it’s being overhauled as the current version can produce the wrong answer. You can challenge the client’s assessment. It then has 45 days to explain how it arrived at its decision. This will give you an opportunity to persuade HMRC that it’s wrong (see The next step ).

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