Contractors could face a higher tax bill from April 2020, when reforms to IR35 legislation are set to take effect in the private sector.

This is expected to raise more than £3 billion between 2020 and 2024, as self-employed individuals who fall within the rules and the businesses engaging them will face a higher tax charge.

IR35 rules were reformed in the public sector in 2017, with the aim of stopping work HMRC regards as 'disguised employment'.

Plans to extend the same reforms to the private sector have been met with criticism, with many contractors concerned the rules are too complex and could affect genuinely self-employed people.

Others argued the administrative burden could discourage businesses from hiring contractors.

The Chartered Institute of Taxation (CIOT) welcomed the choice to defer the reforms until 2020, but said the Government should conduct a wider review of employment status.

Colin Ben-Nathan, chairman of the employment taxes sub-committee at the CIOT, said:

"Off-payroll working is in fact but one facet of a much broader issue of how we tax labour in the UK.

"In our view, IR35, the taxation of the employed vs self-employed, and labour law issues should all be viewed through the same lens and considered together."

Contact us for advice on IR35.

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