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Government consults on IR35 for private sector reform

The government has launched a consultation on off-payroll working rules, known as IR35, for the private sector.

It follows the reforms to IR35 in the public sector, which were introduced in April 2017 and intended to stop work that HMRC regarded as "disguised employment".

The rules are designed to make sure that people who work through their own company, but are in practice employed by a third party, pay the same tax as if they were employed.

HMRC estimates that IR35 rules are only applied correctly in 10% of private sector cases.

In order to tackle non-compliance, the consultation will look at whether to extend the existing legislation to the private sector.

However, the Federation of Small Businesses (FSB) has expressed concerns that doing so could "unfairly single out the self-employed".

Mike Cherry, chairman of the FSB, said:

"The fear of making an honest mistake could stop employers taking on the genuinely self-employed, even when it's clearly the right thing to do.

"Any rule changes made off the back of this consultation need to be straightforward, transparent and come with minimal disruption to small employers who don't have big HR departments or legal teams."

Contact us for advice on IR35.