Freelancers - IR35
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- tonks
Can any freelancers based in the UK tell me what they are going to do about the legislation from the Inland Revenue on the taxation of freelancers?
- soda0
as far as I understand it, if you are a limited company then you'll be ok and will not be affected.
The new regulations are aimed at management companies and agencies that hire out freelancers or consultants. Apparently they have been using loop holes and not paying enough tax.
- emecks0
linkity link?
- Baskerville0
got this email from a recruitment agency I used to use. Not that it affects me as I'm not freelance, but it shows how they are handling the situation:
if you just want the link though it's here:
http://www.hmrc.gov.uk/pbr2006/m…...
--------------------------------...New legislation from the Inland Revenue dealing with the taxation of freelancers
Apologies for this impersonal correspondence, but we are contacting all our candidates, be they existing freelancers or not, or considering going freelance because of new legislation from the Inland Revenue. We at Gabriele Skelton, along with all other recruitment consultancies around the country, have to act swiftly and decisively in order to comply with the new rules from the Inland Revenue with regards to the taxation of freelancers and contractors.
I will try to explain this new legislation as simply as possible. In December 2006, the Chancellor proposed new legislation, “Tackling Managed Service Companies and its Third Parties (us/recruitment consultancies/clients)” to deal with the taxation of freelancers.
The new rules take effect as of April 6th 2007. They are designed to ensure that freelancers do not have any tax advantages over employees. In short, they are ensuring that any person taking on a contract of work has to pay tax and NIC, as well as the employer being liable for Employers National Insurance (ENIC). We have therefore taken immediate steps to ensure that we comply with the new legislation.
As from April 6th 2007, all our freelancers will have to be paid as an employee, therefore paying tax and NIC on a monthly basis. We will from this date be outsourcing our payroll to a company called Blue Intellect LLP and it will:
+ Employ all our freelancers or operate Limited Companies under IR35 rules i.e as employees
+ Deduct PAYE and National Insurance from all freelancers
+ Pay all freelancers every 4 weeks (whether the client has paid or not)
+ All freelancers will be entitled to holiday pay at the rate of 20 days per annum, pro rata
Therefore, from April 6th 2007 we are no longer allowed to represent freelancers who would normally bill a client directly under the guise of being self employed, or a freelancer who works through a Limited Company or Managed Service Company (umbrella company). If you are operating as your own Limited Company, you can still invoice Blue Intellect LLP directly but will be taxed for PAYE and National Insurance on a monthly basis.
We know that many of you will not be aware of these new rules but we have to act now in order to comply with them, as do you. Our clients are also being informed of these rules, and many of them have been operating legitimately under them for some years already.
The good news is that you are guaranteed to be paid every 4 weeks and will be eligible for holiday pay.
You can read more about the rules on www.hmrc.gov.uk/pbr2006/managed...
We understand that this is a big change in the way some of you operate as a freelancer but we are here to help. As a ‘Third Party’, we have no choice but to comply. If you have further queries, please do not hesitate to call or email me or the consultant you normally work with.
Best wishes
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