Freelancers and contractors may be able to claim back thousands in overpaid taxes | Personal Finance | Finance

0
68


Freelancers and contractors may be eligible to claim back thousands of pounds in overpaid taxes – but time is running out.

Freelancers and contractors who have been hit with tax bills for incorrectly operating outside the IR35 legislation may be able to reclaim overpayments but must make their claim before the April 5 deadline, according to contractor insurance firm Qdos.

HMRC often doesn’t automatically offset the income tax, corporation tax and dividend tax these workers may have already paid on their income when the IR35 liability is calculated.

Workers affected can reclaim their money via an overpayment relief claim which needs to be completed within four years of the end of the tax year that the bill was paid. For example, contractors who paid IR35 tax bills in the 2019/20 tax year must complete their claim by April 5, 2024 – even if their payment predates the tax years in question.

The IR35 legislation was introduced in 2000 to prevent ‘disguised employment’. This is when someone operates as an employee but isn’t treated as one for tax purposes – which is considered tax avoidance.

Seb Maley, chief executive of Qdos, said: “IR35 has been a source of controversy since its introduction, and this ‘double taxation’ of contractors is yet another flaw in the legislation’s design – albeit one that is widely overlooked.

“The four-year time limit on claims adds insult to injury, too – limiting the opportunity of these individuals to reclaim overpaid taxes.

“Businesses engaging contractors have also previously been overtaxed when settling IR35 liabilities. But HMRC has found a solution for that, effective April 6 this year. There’s no reason that this fix can’t be extended to contractors – something HMRC should be looking at urgently.

“Until then, it’s essential that contractors are aware of the avenues open to them so that they can recover any overpaid taxes they are due. Given the economic climate, this should be a priority.”

The IR35 rules were reformed in April 2021 to move liability from the contractor to the party engaging them, but this only applies to medium or large engagers.

Contractors working for small companies are still responsible and liable for IR35, as they are for any engagements which predated the reform.

From April 6, HMRC will offset the tax already paid by a business in the event of non-compliance. But as it stands, there is no solution for contractors facing the same challenge – something HMRC has been urged to correct.



Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here