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IR35 is the anti tax avoidance rule that applies to all contractors and freelancers who do not fall under HMRC’s definition of being self-employed and has applied to all public-sector bodies, regardless of size, since April 2017.
Implementation of these new tax measures for the private-sector and unincorporated organisations (for example not-for-profit employers or charities) was delayed due to the coronavirus pandemic but will now come into effect on 6 April 2021. These are being put in place to make organisations responsible for determining whether a contractor carrying out work for them should be treated as an employee for tax purposes.
It will not apply to Small private-sector organisations, however, Medium- and large-sized private-sector and unincorporated organisations will become responsible for applying the rules.
You will be classed as medium or large sized private-sector organisation if you are a limited company or a limited liability partnership and for the last two consecutive financial years, you meet at least two of the following criteria:
- your turnover was more than £10.2 million;
- yours balance sheet total was more than £5.1 million; and
- you have an average of more than 50 employees.
Note : If you are a small entity but part of a medium- or large-sized group, it is the size of the group (including overseas members) that is relevant.
Unincorporated organisations (for example not-for-profit employers or charities) with a turnover for the last financial year in excess of £10.2 million will be classed as medium or large
Unsure which classification applies to your business?
We can help you to determine whether you are exempt from these rules and if you’re not exempt whether contractors carrying out work for you should be treated as an employee. Please do get in touch if you need our help.
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