IR35 Rules (often known as off payroll working rules) first appeared in April 2000 and are used to determine whether a contractor should be treated as an employee or self-employed for tax purposes.
Often seen as complicated and confusing, reforms introduced in April 2021 had the effect of making life harder for both the contractor, if they were seen as being inside IR35 (as they would be treated as employees and taxed as such), and for the hiring client who would then be liable for the contractor’s employment taxes. This problem is usually called double taxation.
The effect of this was that hiring clients reduced the numbers of contractors they needed, whilst there was an increase in contractors looking to close their businesses down, either as solvent liquidations (MVLs) or creditors voluntary liquidations (CVLs), because their businesses were no longer viable or already insolvent.
Further reforms, introduced by HMRC on April 6th 2024 will see HMRC automatically offset the taxes already paid by a contractor when issuing a business with an IR35 bill. It is hoped that these changes could see more contractor roles appearing outside IR35, which would be of benefit to both hiring client businesses and contractors.
How this plays out only time will tell, but the consensus currently is that it will lead to more roles sitting outside IR35, and thus avoiding the double taxation scenario.
Take a look at our website for the full story and how Insolvency Practitioners can help: https://www.antonybatty.com/ir35-changes-need-close-your-company-insolvency-practitioner-london-as-a-result/
IR35 rules that affect contractor companies, particularly post the April 2021 reforms, are complex and have already meant closure for many companies. Our experience in the Antony Batty Bournemouth office is that more Directors are considering closing as a result, notwithstanding the April 2024 reforms. We are here to help and the sooner advice is sought the more options there are available.