For those that have been eagerly awaiting the IR35 latest, there’s been a small but welcome change that accompanied the new tax year on the 5th April 2024. So what does it mean for contractors?
Well, the treasury has finally ended the threat of double taxation for contractors that fall foul of IR35. As we know, IR35 looks to reclassify sub-contractors who supply their services through a limited company as an employee for tax purposes; previously, the issue arose if HMRC decided a sub-contractor had been miss-classified as being outside of IR35 when they should have been caught by the legislation.
In many circumstances HMRC would refuse to take into account any tax already paid by the sub-contractor's company – PAYE, or corporation. Instead, they would levy a PAYE bill on the total amount paid to the sub-contractor, hence the double taxation of the same earnings. From now on (but not retrospectively) HMRC will now include taxes already paid by the sub-contractor– but it’s a complicated assessment. You could of course avoid the risk altogether by simply using EEBS to supply your sub-contractors…
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