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As part of our Ask the Experts IR35 question and answer series, we spoke to Sue Ollerenshaw, Director at Efficient Employment Tax Solutions Limited, about whether the upcoming IR35 reforms will impact self-employed CIS workers.
Sue: There are several tests that need to be considered and there is a set order in which they need to be worked through.
If somebody is engaged directly by a client, the normal rules for employed or self-employed status will apply and the client, as the engager, would be responsible for any PAYE and National Insurance.
The PAYE agency worker rules also need to be considered. These would apply when an agency is supplying a worker and they are either a sole trader, an LLP or a partnership. You need to consider whether you have the right of supervision, direction and control.
In theory, the PAYE agency worker rules do not apply to limited companies, however, if an agency only ever uses limited companies, the revenue will use some targeted anti-avoidance rules to seek PAYE and National Insurance from the agency.
In this situation, it would be regardless of whether it is the agency or the client that hires the worker. You would consider the same tests as for any direct engagement, but with the added procedures of issuing Status Determination Statements and the liability passing up and down the chain.
If a business is deemed to be outside of IR35, you need to be aware of the Managed Service Company rules. Under the MSC rules, the transfer of debt can go to directors personally. This occurs if either the client or the recruitment agency actively encourages using limited companies to supply the service’s business (this would not apply in the normal course of supplying services). It is only then that you need to consider if there is no obligation to pay at all under any of the rules.
If the business is carrying out construction industry operations, the construction industry scheme needs to be considered. This doesn't just apply to businesses in construction, it can apply to some deemed contractors including those that spend a significant amount of money on their own premises, for example housing associations.
Don't be unprepared for the IR35 reform. If you need some help navigating through the IR35 changes, then we’re here to help. Whether you’re exploring the best ways to manage your contractors, or need support with your people strategy following the IR35 reform, get in touch with the team today.
Sue is a Tax Specialist and the Director at Efficient Employment Tax Solutions Limited. With over 30 years in the industry, Sue advises all types of clients on how to comply with PAYE, NIC, Employment Income Tax and Construction Industry Scheme (CIS) reporting obligations. Previously working as an Inland Revenue PAYE Auditor and then Head of Employer Tax Consultancy for a Group A accountancy firm, she specialises in employment status and the interaction of IR35.