IR35 Offset: Good News for Contractors, Simplifying the Tax Landscape 

The world of contracting just got a little less complicated! A new policy called the IR35 offset has been introduced, aiming to tackle the issue of double taxation and create a fairer system for everyone involved. 

Here’s a breakdown of what this means for you: 

What is IR35? 

IR35 is a set of rules designed to ensure contractors working like employees pay the right amount of tax. There are two main categories: inside IR35 (similar to an employee) and outside IR35 (genuinely self-employed). 

The double taxation problem

Previously, if a business mistakenly classified a contractor as outside IR35 (when they should have been inside), they faced a hefty tax bill for the difference. This double taxation risk discouraged businesses from hiring contractors, impacting the freelance market.

The IR35 offset: Sharing the burden fairly

The new IR35 offset addresses this double taxation issue. Here’s how it works: 

• If HMRC investigates and finds a contractor should have been inside IR35, the offset allows businesses to reclaim some of the tax they’ve already paid through the contractor (Corporation Tax and dividends). 
• This reduces the overall tax burden for the business and eliminates the double taxation risk. 

Benefits for Contractors

his change is positive news for contractors, with potential benefits including: 

• More ‘Outside IR35’ opportunities: With the reduced tax burden for businesses, there’s a chance we might see more roles advertised as outside IR35, offering contractors greater flexibility and potentially higher income. 
• Fairer tax system: The offset ensures contractors aren’t unfairly taxed twice on the same income. 

What about recruitment agencies?

While the IR35 offset offers a more stable environment for the contracting market, it’s important to remember that recruitment agencies still have a responsibility to ensure they understand IR35 and classify contractors correctly.  

What this means for you 

The IR35 offset is a positive step forward for the contracting industry. Here are some key takeaways: 

• Understand your IR35 status: If you’re a contractor, it’s important to understand your IR35 status to ensure you’re paying the right amount of tax. There are various resources available online and from specialist tax advisors to help you determine your status. 
• Work with reputable agencies: Choose recruitment agencies like Corecom, that demonstrate a strong understanding of IR35 and can guide you through the process. 
• Stay informed: The IR35 landscape can change, so keeping yourself updated on the latest developments can help you navigate the system effectively. 

Overall, the IR35 offset offers a more balanced and less risky environment for contractors. By understanding your rights and responsibilities and partnering with the right agencies, it’s possible to build a thriving contracting career and to work successfully with contractors on those business-critical projects.  

To learn more about contracting with Corecom, speak to Sean Bentley.