IR35 private sector; are you ready?
Changes to IR35 tax legislation will come into effect on 6th April 2021. The new rules are primarily targeted at combatting what HMRC perceives to be “false self-employment” amongst off-payroll workers who are carrying out the same duties as PAYE employees, but are not paying the same tax and NI.
The changes bring with them implications and responsibilities for employers and contractors alike.
We successfully navigated our public sector clients and candidates through these changes in 2017. Since then, we've been helping our private sector clients and off-payroll workers prepare too. We are happy to share our expertise and help you navigate through the legislation and be prepared.
If someone is absent from their work through sickness for example, if the duties fulfilled in the role can be completed by someone else, then generally this infers that the person is operating within IR35.
Determining ‘inside’ or ‘outside’ of IR35 puts emphasis on the extent to which an employer controls where and when a worker engages with their role. For a role to be "outside" IR35",
they must be working with minimum supervision or control from the employer.
Mutuality of obligation
If there is a long term relationship between the employer and the worker, HMRC argues that “where work is regularly offered and accepted over a period of time, a continuous contract of employment may be created.”
IR35 for employers
Under current rules, it is the responsibility of the contractor to comply with IR35 and determine whether they are self-employed or employed for tax purposes. However, from April 2021, the responsibility for making this determination will fall to the end client (also known as the hirer or engager), i.e. the organisation who is receiving the contractor’s services.
If you use the services of self-employed contractors we can help you prepare for the IR35 changes and help to minimise any risks to your business and resource supply.
How does IR35 affect contractors?
From April 2021, contractors assignments will be assessed by clients, with status determined as employed for tax purposes (or “inside” IR35) or self-employed (“outside IR35”). Contractors whose assignments are determined to be “inside IR35” will pay PAYE income tax and National Insurance just like an employee. Net take home pay is likely to be lower than under a self-employed model.
If you are a contractor operating through a personal services company, it is important that you take advice from your accountant about how this might impact you.
If you are a contractor working in either the healthcare sector, or the driving sector, please see the following links to our industry-specific blogs:
We're here to help
If your employer determines your line of work is inside IR35, then from April 2021, you have decisions to make around your employment status.
If you are a contractor, following an “inside” IR35 status determination you may have some decisions to make about how you provide your services going forward.
Speak to your Search consultant about the benefits of providing your services as a PAYE employee with Search and how we can support you.
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Helpful IR35 resources
Whether you're an employer or a contractor, it can help to take advantage of relevant online resources on IR35. From HMRC guidelines to the CEST (Check Employment Status for Tax) service, we've found some of the best information to help you navigate through the complex legislation.