IR35: Will it impact you?

The IR35 (Off-payroll workers) is not a new legislation. It was first introduced in April 2000 to tackle individuals working in firms as “disguised employees” benefiting from avoiding income tax and national insurance contributions.

We have recently witnessed confusion in the contracting market. From 6 April 2020 the off-payroll working rules that apply to the public sector organisation are being extended to the private sector.

“The rules apply to all public sector clients and private sector companies that meet 2 or more of the following conditions”:

  • turnover of more than £10.2 million;
  • balance sheet total of more than £5.1 million;
  • more than 50 employees.

Essentially, from 6 April 2020, responsibility for working out whether the rules apply will shift to the end client and, where they do, the fee payer must deduct tax and National Insurance from payments made to the worker’s personal service company. As a result, we have recently seen large businesses removing contractors.

To prepare for the changes, HMRC recommend that medium and large private sector companies should:

  • pass your determination and the reasons for the determination to the worker and the person or organisation you contract with.
  • make sure you keep detailed records of your employment status determinations, including the reasons for the determination and fees paid.
  • have processes in place to deal with any disagreements that arise from your determination.
How can we help?
  • Help with HMRC Investigations.
  • Review your current workforce (including those engaged through agencies and intermediaries) to identify those individuals who are supplying their services through personal service companies;
  • Help determine whether the off-payroll rules will apply for any contracts that extend beyond 6 April 2020 (HMRC’s Check Employment Status for Tax (CEST) tool can be used to determine a worker’s status);
  • Help establish processes to determine if the off-payroll working rules will apply to future engagements. These may include assigning responsibility for making a determination and determining how payments will be made to contractors who fall within the off-payroll working rules.
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