Over the past few years the government has introduced a wealth of legislation to try to tighten up on what they perceive as ‘tax avoidance’ and to try to increase compliance amongst flexible workers. With up to one third of workers misclassifying themselves as ‘outside of IR35’, the projected losses to the economy through unpaid tax and NI contributions are £1.2 billion by 2022/23, so it is little surprise that the government has looked to shift the responsibility up the supply chain.
The 2017 IR35 reforms to the public sector caught the industry off guard, resulting in much confusion and a poor implementation of strategies. Whilst there is much speculation that the Autumn budget will bring an extension to the private sector, it is far from definitive. Nonetheless, contractors should be prepared for the worst. If the budget does unveil IR35 changes to the private sector, contractors will no longer be able to take dividends through a Limited Company, making the structure very tax-inefficient and hard to justify the administration it brings. With little time to implement these changes before April 19, the contractor supply chain is encouraged to seek advice to make sure they operate compliantly and do not expose themselves to the risk of financial penalty.