Navigating IR35: A guide for contractors
IR35 Changes: What Happened in April 2021?
The IR35 reforms in April 2021 brought significant changes to the private sector, aligning it with the public sector’s IR35 regulations.
For more information about IR35 changes you can check the following information given by HM Revenue & Customs:
Key changes include:
Client Responsibility
Medium and large businesses in the private sector are now responsible for determining the IR35 employment status of contractors, transferring this responsibility from contractors themselves.
Status Determination Statement (SDS)
Consultants ensure compliance with tax laws and help businesses maximise tax benefits, especially for those lacking in-house resources (E&P Services, 2024).
Exemption for Small Businesses
Small businesses are exempt from these changes, allowing contractors who work for small clients to retain the responsibility for determining their employment status under IR35. Under Companies Act 2006,
A business qualifies as “small” if it meets at least two of the following criteria:
- Fewer than 50 employees
- An annual turnover of less than £10.2 million
- A balance sheet total of under £5.1 million
Reasonable Care Requirement
Both public and private sector clients are required to demonstrate “reasonable care” in determining IR35 status. Failing to meet this requirement means that the client will be responsible for incorrect determinations. This includes keeping detailed records of employment status decisions and documenting the process to reach them.
IR35 Compliance Support
To aid clients in complying with IR35, HMRC has provided an IR35 checklist designed to help businesses meet the reasonable care standard and document each determination accurately.