IR35 Reforming the Private Sector

Readers will probably be aware of the IR35 legislation and the reforms which took place in April 2018 relating to work for the Public Sector.


If you were a small Sub-Contractor and you contracted your services to a public body from April 2018 the public body were responsible for deciding whether you were more of an employee rather than a Contractor. Having made that decision and if you were classified as an employee, tax and national insurance would be deducted from the monies paid to you rather than the figures being paid gross to your Service Company.


From April 2020 these reforms are being extended to the Private Sector.


It is important to note that this only applies to Contractors working for a medium/large client and will have their employment status determined by their client. The criteria for determining the size of a business will be similar to that defined in the Companies Act 2006 which requires two of the following to be met:

i) A net turnover of more than £10.2 million.
ii) A balance sheet total more than £5.1 million.
iii) Employs more than 50 employees.
If it determined that IR35 applies the fee payer will be responsible for deducting PAYE and NIC at source from the income paid to the Contractor. This reform is not retrospective.


Readers will probably be aware of the IR35 legislation and the reforms which took place in April 2018 relating to work for the Public Sector.


If you were a small Sub-Contractor and you contracted your services to a public body from April 2018 the public body were responsible for deciding whether you were more of an employee rather than a Contractor. Having made that decision and if you were classified as an employee, tax and national insurance would be deducted from the monies paid to you rather than the figures being paid gross to your Service Company.


From April 2020 these reforms are being extended to the Private Sector.


It is important to note that this only applies to Contractors working for a medium/large client and will have their employment status determined by their client. The criteria for determining the size of a business will be similar to that defined in the Companies Act 2006 which requires two of the following to be met:


i) A net turnover of more than £10.2 million.
ii) A balance sheet total more than £5.1 million.
iii) Employs more than 50 employees.
If it determined that IR35 applies the fee payer will be responsible for deducting PAYE and NIC at source from the income paid to the Contractor. This reform is not retrospective.