The UK government is set to modify the criteria for classifying businesses based on size, which will have notable financial implications for the Treasury. Starting from April 6, 2025, the thresholds for defining micro, small, and medium-sized businesses will rise, permitting more companies to qualify as small businesses. With this adjustment, around 10,000 medium-sized companies will be reclassified, exempting them from the private sector IR35 off-payroll reforms. This shift is expected to result in a loss of approximately £20m in taxes annually due to non-compliance with IR35 regulations.
The UK government's new company classification thresholds will cost the Treasury around £20m annually in lost tax revenue due to IR35 non-compliance, impacting thousands.
Changes announced on April 6, 2025, will shift 10,000 medium-sized businesses to small business status, influencing both tax responsibilities and contractor classifications under IR35.
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