Are you IR35 compliant?
With the IR35 legislation it is now vital that you as a contractor, or you as an employer who use contractors, are fully compliant and not open to any tax liability or fines. Every contract role needs to be assessed either ‘Inside’ or ‘Outside’ of IR35 and Status Determination Statements produced.
At Hunter Selection we want to take this task and the worry out of your hands and leave you to focus on your role, so we have partnered with Kingsbridge Contractor Insurance who are IR35 specialists.
All our clients will benefit from the use of their assessment tool which was developed by expert IR35 tax specialists to provide you with an easy and secure solution to the IR35 problem, all included as part of our service.
In short, we would assess any contractor vacancy we worked on for you as part of our process so you would have total peace of mind when recruiting with Hunter Selection.
What is IR35?
IR35 is the name given to a tax legislation that is aimed at identifying individuals who are avoiding paying the tax that they should be. The IR35 legislation specifically challenges those people who supply their services to clients via their own company, often known as a ‘personal service company’, be it a limited company or a limited liability partnership, who, in the ever watchful eyes of HMRC, should be classed as ‘disguised employees’. This basically means that HMRC do not recognise the contractor in question as ‘self-employed’ from a taxation perspective and therefore they should be taxed the same way that a permanent employee should be, thus falling insider what is called IR35.
Outside IR35 = Genuine contractor – no action taken.
Inside IR35 = Disguised contractor – action required.
Inside or outside IR53?
Under current guidance, for an assignment by a Limited company contractor to be considered ‘outside IR35’, several conditions need to be met.
- Independence / control: The client does not significantly supervise, direct or control how the contractor delivers the services. Further, consultants must not be treated as employees and should not receive the same benefits as employees.
- A right of substitution: The consultant can provide a substitute if he/she is unable or unwilling to do the work and the client has no right of veto as long as the substitute has the right skills/qualifications.
- Non-exclusive: Nothing in the contract should prevent the contractor from performing paid work for more than one client concurrently.
- No mutuality of obligation: During an engagement, there is no obligation for the consultant to provide any services outside of those documented on the Statement of Work. Similarly, at the end of the contract, there is no obligation for the client to offer more work to the consultant and if more work were offered, there is no obligation for the consultant to accept such work.
**This is not an exhaustive list, and the most certain way to be sure whether an assignment falls inside or outside of the legislation is by the use of assessment tools produced by IR35 tax specialists and backed by insurance companies to make sure you are fully covered.
How does IR35 affect everyone?
Falling inside the legislation could have a huge impact on a contractor, because if their position at a company is seen as being an employee by HMRC, they still would not be under employment by the company providing the contract, therefore not receiving any bonuses, benefits or ‘perks’ that employees often have.
In summary, the consequences of falling inside IR35 can result in significant financial penalties.
For the employer who use contractors, having a contractor fall inside IR35 could result in having to pay extra in rates to cover the contractor’s extra costs.
An additional risk is that you could lose contractors and their expertise as they move to ‘Outside IR35’ contracts which could result in disruption to projects, deadlines & SLAs with your clients.
Finally, if a contractor is assessed incorrectly then the ‘End Client’ is liable to the pay the tax back and would receive fines – so it is vital everyone assesses their workforce urgently.
Client Exemptions: (To be exempt you would need to meet 2 of these criteria)
- Turnover less than £10.2 million
- Balance sheet less than £5.1 million
- Less than 50 employees
What should you do now?
Whether you have existing contractors or are planning to take on contractors it isn’t too late to get in touch with Hunter Selection and let us assess your workforce using our fully insured assessment tool which has been produced by expert IR35 tax specialists –
- Carry out your SDS (Status Determination Statements).
All contractors need to have an SDS so to get the most accurate assessment on whether or not a contractor should be considered Inside IR35 or Outside IR35, you should be liaising with the contractor themselves and their key points of contact within your business, so communication is key.
- Assess your workforce. You’ll need to know how many contractors are working through a Limited company, where there are, and what they do.
- Pass the Status Determination Statement down the supply chain. Your responsibilities under the legislation requires you to pass your decision and the reasoning behind it to all interested parties, namely the contractor and the agency who engages them. It’s important to protect yourself by ensuring any recruitment agencies within your supply chain are complying with the decisions you have made and are deducting PAYE Tax and National Insurance Contributions as required.