Fresh concerns raised over forthcoming IR35 changes

The Association of Independent Professionals and the Self-Employed (IPSE) and other contractor bodies have issued fresh warnings about forthcoming reforms to IR35.

The reforms, which are due to take effect on 6 April 2017, will shift compliance responsibility from independent contractors in the public sector to their employers, public bodies and recruitment agencies.

HMRC has previously said that it hopes the changes will raise approximately £400million through combating the increasing number of contractors it claims are failing to pay the correct tax under existing IR35 rules.

But contractor bodies have now warned that, in many cases, personal service companies (PSCs) deemed inside the public sector’s new off-payroll rules could risk having their entire contract history examined under IR35 – as opposed to just those that fall after 6 April.

The warnings come from a number of contractor bodies and trade groups, including IPSE, and also suggest that contractors declared inside IR35 by their public sector employer could potentially face ‘frightening tax bills’ for previous work.

IPSE’s Mr Bryce warned: “The threat of retrospective investigation on contracts which are deemed to be inside IR35 after April, is likely to encourage more contractors to turn their backs on the public sector”.