IR35 Public Sector Reform
HMRC is declaring their IR35 public sector reform a huge financial success.
They say that it has increased their tax take by £550 million from contractors working in the public sector.
HMRC said that this was the result of correcting previous non-compliance by freelancers using Personal Service Companies.
They brought the new rules into the public sector in April 2017. Many contractors who had been working for years in the public sector via their limited companies now found themselves inside IR35.
Their clients made them take HMRC’s new IR35 test the CEST and this made half of them inside IR35.
Contractors Failing HMRC’s IR35 Test
Indeed nearly half of public sector contractors failed the test.
This IR35 test was made up by HMRC according to their view of IR35. It had no basis in law. The IR35 laws hadn’t changed.
According to HMRC “the cost of non-compliance with the off-payroll working rules in the private sector is growing and will reach £1.3billion a year by 2023/24.
“It is therefore right for the government to take action to address this in order to secure funds that could otherwise be spent on vital public services.”
So, they, and the Government, are rubbing their hands thinking of the tax bonanza from UK freelancers – even more than they got from he IR35 Public sector Reform.
Contractors Switching to Umbrella Companiets
They call freelancers off-payroll workers. They don’t see them as businessmen and women.
What actually happened, in practice, with public sector freelancers, was that rather than pay the IR35 tax most of them went into umbrella companies.
It’s likely that private sector contractors will do the same.
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