IR35 – First it was Public and now it is Private (well in April anyway)…

Undermasthead Shape

IR35, the Intermediaries Legislation, was originally created by the UK Government and initially implemented into the public sector through the Finance Act 2000 as a revised set of rules. The aim was to ensure that contractors were paying the same tax and national insurance contributions as an equivalent employee if, to all intents and purposes, the contractor was acting as and being treated as an employee. Looming changes to the IR35 rules were originally set to be extended into the private sector on 6th April 2020 until the COVID-19 pandemic struck, affecting various sectors including Construction and Energy, in addition to the Government’s decision to defer the implementation of IR35 regulations into the private sector.

The year 2020 has certainly been daunting for contractors due to the anticipated extension of IR35, coupled with the widely publicised lack of support for Directors of Limited company services companies during the lockdown period. However, IR35 campaigners can bide their time now that the IR35 roll out has been postponed to April 2021.

Hundreds of campaigners including Contract Calculator, IPSE (The Association of Independent Professionals and the Self-Employed) and many MPs have campaigned against the proposed changes. In fact, the extension has provided them an extended opportunity to push the Government to audit or terminate the new IR35 regulations altogether.

In many cases the government itself has suffered as many contractors had to cease work or chose to re-engage as PAYE employees. In some cases this meant the same people with the retained knowledge and experience were re-employed at a 30% premium to compensate for the additional tax burden (in addition to National Insurance employers contributions to be paid).



New proposed IR35 Rules:

  • Transfer of responsibility to assess IR35 status for tax purposes from contractors to the end client, for large and medium organisations.
  • Small organisations will be exempt but will have a statutory obligation to confirm whether or not they are ‘small’ which will take the onus off contractors to determine this.
  • The rules will no longer apply to clients based wholly overseas, with the obligation to determine tax status in these instances remaining with you, the contractor.
  • The new rules will now apply only to payments made for services provided on or after 6 April 2021.
  • Responsibility will now sit equally with the contractor and the end user client. Any unpaid tax can be collected from either party if there has been an error made.

If the HMRC suspect that a contractor is operating inside IR35 when claiming to be outside IR35, they can begin an investigation which can be backdated for up to six years, and all owed tax from that entire period can be claimed back by the Government.

So even though it may be 12 months before contractors and clients are forced to accommodate IR35 in the private sector, there is some time now to choose the best way of working.

This 12-month delay merely puts off the inevitable as getting it wrong or choosing to ignore this change coming, could be putting yourself (as a Contractor or end Client) at risk of fines further down the path.


The COVID-19 pandemic has significantly impacted various industries and projects across the UK, specifically the advancement of the UK’s 5G infrastructure, the UK’s exit from the EU and the commencement of HS2’s first Phase. Click the links to read more from our ‘Back to the Future’ Series.