IR35 – An update for businesses and professionals in the creative industries
In Autumn last year the then chancellor of the exchequer, Kwasi Kwarteng, announced that the government would repeal the 2017 and 2021 IR35 off payroll rules from the start of the new tax year in April 2023. Those plans were subsequently scrapped by the new chancellor, Jeremy Hunt.
This means that most businesses and organisations will need to continue carrying out status determination statements when engaging individual consultants and freelancers via intermediaries such as personal service companies and to pay the tax required (if any).
This will be particularly relevant to creative businesses, design studios, TV production companies and indie games developers and their consultants given the project-based nature of such businesses. If you engage consultants or freelancers to assist with projects through intermediaries then you must be especially conscious of the IR35 rules.
If you fail to carry out a status determination statement, or you get the status determination wrong, you will be liable for the consultant’s tax and national insurance contributions. The 12-month grace period (which provided some leniency for organisations making genuine mistakes) ended in April 2022. This means that if you make a mistake, you'll also have to pay penalties and interest.
In an attempt to reassure the markets following the reaction to the catastrophic mini-budget, the Chancellor has said that it aims to reduce its spending and increase revenue. It's therefore likely that HMRC will try to recover as much outstanding tax as possible and may prioritise its IR35 investigations.
How we can help
HMRC's calculator Check employment status for tax - GOV.UK provides some helpful guidance however, if you require assistance we can provide an IR35 assessment which includes a detailed report setting out how our assessment was made and what factors are particularly relevant to each case.
If you would like further information on either of these please get in touch with Hannah Clifford in our employment team.
