24 March 2021
Let Hunter Selection manage your IR35 process
If you are a contractor or a contract-provider in the private sector, planned changes to the rules governing IR35 on the 6th of April 2021 could affect the way you deal with tax and National Insurance contributions. That’s why we’ve put together this handy Q&A that should cover everything you need to know.
What is IR35?
IR35 refers to two bits of legislation that were originally enacted in 1999 to combat tax avoidance among off-payroll workers. The term ‘off-payroll worker’ refers to someone who if not for the fact they provide a service to a company through an intermediary company, would be considered an employee.
These rules were created therefore to ensure that people who work via an intermediary such as a Personal Service Company (PSC) pay the same amount in tax and national insurance contributions as they would if they were directly employed.
What changes are being made on the 6th of April
From the 6th of April 2021 in many cases, it will no longer be the onus of the contractor to decide if the IR35 rules apply to them, it will instead be the responsibility of the supplier of the contract to decide this.
This brings the IR35 rules for medium and large-sized private sector businesses in line with the rules which have for years been the case for the public sector. Therefore, from the 6th of April all workers/contractors providing services for clients in the public sector as well as for medium and large-sized private sector organisations, it will be the responsibility of the client providing the contract to decide their worker/contractor employment status.
The only case where it will remain the intermediary’s responsibility to decide their status regarding IR35 is for contracts with small businesses in the private sector.
Why are these changes being made?
These changes are being bought in to make it harder for off-payroll workers to avoid contributing as much from their fee into National Insurance and Tax, by working through an intermediary company this is known as being a ‘disguised employee’.
What do I need to do?
If you are a medium or large private-sector organisation you will need to decide whether the service provider’s contract falls within or without IR35, this will be done by carrying out Status Determination Statements (SDS).
All of your contractors should have an SDS on whether or not they should be considered Inside IR35 or Outside IR35, you should liaise this decision with the contractor.
How can I tell if a contractor is Inside or Outside IR35?
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.
Can I get help with IR35?
Yes! In preparation for the big date, we at Hunter Selection have teamed up with Kingsbridge to provide an award-winning comprehensive IR35 solution that is capable of managing the entire process on your behalf, taking away the worry and enabling your contract-force to continue operating outside of IR35.
Please get in touch by emailing: firstname.lastname@example.org or telephone: 01275 371981.