IR35: ‘Never the right time’ to implement changes – how Britons can navigate tax updates

UK 'wants to get back to business as usual' says expert

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IR35 refers to tax legislation which has the purpose of cracking down on tax avoidance and ensure everyone is paying their fair share. As the Government explains: “The rules make sure workers who would’ve been an employee if they were provided their services directly to a client, pay broadly the same Income Tax and National Insurance contributions as employees.” However, with regulations set to change, there is understandable hesitancy about what this could mean. spoke to Michael Paulin, a practising tax barrister and founder of Wolf IR35 Legal Services about tomorrow’s changes.

Mr Paulin offered insight into how the changes are set to be implemented, the responsibilities of businesses, and how the updates can be navigated.

Firstly, he addressed some of the reticence expressed by many about the implementation of the new IR35 rules.

He said: “End clients need to get their heads around a tax law exam question that they’ve often never been set or had to worry about.

“Many have only just discovered they have responsibilities they are not entirely sure they ought to handle. 

“I can understand why many people are finding this prospect somewhat alarming.”

In a similar vein, Mr Paulin acknowledged there were some who believed changes should be further delayed, in addition to the year’s reprieve due to COVID-19.

In July 2020, it was suggested a delay to the introduction of new IR35 rules to the private sector should be implemented until 2023, but this was blocked by MPs.

Mr Paulin continued: “There are those such as parliamentarian David Davis who moved in mid 2020 to postpone the new legislation, but that Bill was defeated in the Commons in July 2020.

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“It is important to remember this has been through Parliamentary due process and ultimately, it is something that has to be grappled with at some point.

“No point will be the right time, it will never be the right time for these kind of changes.

“Although this is arguably the worst time for many businesses, with the right approach and clear and transparent process oriented legal services, it is a surmountable challenge.”

So, with IR35 changes pushing ahead, it will be the responsibility of businesses and contractors alike to get to grips with the new rules.

Although, on a surface level, this may appear complex, Mr Paulin has suggested pacing oneself when it comes to the legislation will be key.

He added: “Once a structured and holistic process is provided to a business, they are set and they will be set forever with respect to this particular niche area of tax compliance.

“Once the correct system is implemented, the client can continue to utilise the self-employed and independent contractors as they may wish.

“This can be done without any of the anxiety and understandable worry about whether they are doing so in a legally compliant manner.”

Mr Paulin suggested viewing the new legislation as needing a “greenhouse” in the sense that issues need to be incubated to provide the best solutions.

From a legal perspective, once prudent ways to organise a need for services and human resources are identified, a model which adheres to HMRC’s IR35 rules should be created. 

He added: “There is good news. If businesses get sensible, solid legal and administrative support, it is possible to combine law and technology.

“This will enable businesses to streamline all of their compliance processes, for example onboarding and anti-money laundering and compliance with IR35.

“The digital age post pandemic is even more upon us, and advisers need to support everyone in streamlined and fluid ways.”

In this sense, Mr Paulin concluded by urging businesses to reach out to gain advice on what can often be a complicated issue.

This, he said, will ensure contractors continue to get the level of support they both need and expect. 

He said: “It is essential that medium and large business gets in touch and starts to have conversations.

“It is essential there is a dialogue which is begun with those who have genuine expertise and have an in-depth knowledge of both the new legislation and HMRC compliance and corporate best practice.

“If those conversations are had, and they can be had in a fair-minded and progressive way, then there is no reason in principle why what appears like a hurdle is in fact more like a curb.”

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