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Treasury criticised over IR35 denial

The Treasury is facing accusations of being in denial about the full impact of the new IR35 Off-Payroll changes to the tax system that are creating serious problems for freelance contractors and their clients.

Those levelling this criticism claim that Mel Stride, the Financial Secretary to the Treasury, is being inaccurate in describing these Off-Payroll tax changes as simply a shift in who is liable for applying the rules. They also claim he has been repeatedly told that the changes are more far-reaching than this and that they put a real financial burden on those looking to hire contractors.

Under the Off-Payroll tax rules, a client seeking to hire a freelance contractor judged to be within their scope will face costs of up to 14.3% more when hiring them thanks to employment taxes.

Under the previous IR35 system, contractors who were liable for this had income tax and both employee’s and employer’s national insurance taken out of their fee. The new Off-Payroll system will see the client hiring the contractor required to pay 13.8% employers’ National Insurance, as well as 0.5% Apprenticeship Levy in addition to the fee.

This adds up to a 14.3% tax on anyone hiring a contractor adjudged to fall within these new rules, something that Stride has refused to recognise and that Contractor Calculator is calling a “tax time bomb”.

Given the difficulties in dealing with the tax system, it’s no wonder that people often use expert self-assessment accountants to ensure that they avoid mistakes.

Posted by Peter
June 5, 2019

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