IR35 is a framework which was designed to stop disguised employment, where contractors pay less tax while working in the same way as PAYE employees.
HMRC confirmed in the recent budget that the obligation to determine if the IR35 rules apply to private sector service contracts will shift from those doing the work to the company they work for. This means that from April 2020, those contractors that this applies to will have to account for PAYE tax and National Insurance.
The changes were previously introduced in April 2017 for contractors working for public bodies and resulted in many of them moving from working via Limited Companies to working through PAYE. However, HMRC have so far said that the change will only apply to medium-size and large businesses that hire contractors in the private sector.
The Chancellor has promised a follow-up consultation that will clarify which businesses are classed as a small business for IR35 purposes and could also result in changes to the proposals.