Ever heard of IR35? A job for your accountant or legal team, perhaps. But don’t shrug off your responsibilities.
If you’re working out of an intermediary (limited company) IR35 is likely to fall onto your ‘to do’ list in some shape or form. Here’s what you need to know…
What is IR35?
IR35 has existed for some time. Introduced by HMRC in April 2000, IR35 is a piece of legislation designed to tackle tax avoidance by contractors. It aims to do so by assessing whether an individual is a genuine contractor used by an organisation or is instead what is known as a ‘disguised employee’ for tax purposes.
The rules change slightly on 6 April 2021 and are applied differently. From this date, technically all public authorities, medium and large sized clients, will be responsible for deciding the employment status of workers (which also means contractors and consultants). A company qualifies for the small company exemption, if it meets two or more of the following criteria:
Whatever you call yourself, you should be certain of whether you or your workers’ status falls in or outside of IR35.
What do the changes actually mean?
If your worker provides services to a public sector client, or a medium or large-sized private sector client, they:
Different rules apply if your worker:
Now, you will also need to communicate your ‘determination’ (i.e. your decision) using a Status Determination Statement or SDS. This must be communicated to the contractor and/or organisation you’re working with and set out your conclusions and the reasons you have reached those conclusions.
If your worker does not get an employment status determination
The rules are not changing for these clients If your worker is providing services to a small-sized client in the private sector.
If the client confirms it is a small-sized organisation, you as the intermediary (usually a limited company) will be responsible for determining your worker’s status to see if the off-payroll working rules apply.
What to consider when conducting a determination
It’s really important that your worker’s arrangement is documented. Consider the following key areas:
The important thing is to have a document trail of your conclusions including:
If you are taking on contractors, the responsibility to deduct tax and National Insurance rests on you until you tell the contractor otherwise.
For more details, please join our free IR35 webinar on Wednesday 17 March at 12 noon (a recording will be available).
360 Law Group’s Erika Moralez-Perez will be joined by Mark Taylor from Duncan & Toplis / Kreston International to provide an insight into the implications of the new “off-payroll working rules” under IR35. The 45-minute webinar and Q&A will discuss what it means for your business, what you need to do and the financial implications of the legislation.
By Erika Moralez-Perez, Corporate Solicitor at 360 Law Group