What is IR35?
The off-payroll working rules, also known as IR35, is a piece of UK tax legislation that is designed to identify contractors and businesses which are avoiding paying the appropriate tax by working as 'disguised' employees, or are engaging workers on a self-employed basis to 'disguise' their true employment status.
What is changing in April 2021?
Currently, if your business hires a contractor who declares they are ‘outside’ IR35, then as a hirer you do not need to deduct tax or NI from the fees you pay them. Their fees are simply a business expense to your company. From 6 April 2021, the reformed IR35 rules shift the responsibility for determining the tax status of a contractor from the worker to the organisation. This is already the case in the public sector.
What do I need to do as a client?
It’s important to start making any changes now to ensure you follow the rules compliantly. This will involve auditing your flexible workforce, understanding their contract end date and how the individual is set up to be paid. You should then, using either the Government CEST tool or an independent IR35 assessment, obtain IR35 status determinations for each job role performed by any contractor.
For all new contractor hires you plan to make which will mean the contractor is working with you beyond April 6th 2021, you should again complete the Government CEST tool or obtain an independent IR35 assessment to obtain a status determination. Once you have status determinations you can agree any contractual changes required with your flexible workforce whether through their respective recruitment agency or with them if they are engaged by you directly. In addition, you should ensure all hiring managers are up to speed on the new rules and you are setup to continue to be able to attract flexible workers to your business.
Can I still engage with Limited Company contractors?
Yes. You must ensure you have the correct process in place to obtain an IR35 status determination using reasonable care. Once this has been done, it needs to be communicated through the supply chain and the Fee Payer needs to ensure that the relevant compliant payment process is used.
What do I do if the rules apply?
If the end client confirm the assignment is to be considered Inside IR35, meaning the rules apply, the Fee Payer (whoever in the chain is paying the Limited Company) has to make the relevant PAYE Tax and NI deductions before paying the Limited Company. Alternatively, the Fee Payer can request that the contractor works through a verified Umbrella Company.
How can Synapri help?
We have extensive experience in contract staffing and the IR35 changes that came in to effect in 2017 in the Public Sector, so have been through these changes before. Our in depth knowledge of mitigating any risk with the changes whilst protecting and optimising your flexible workforce means we can assist you with any audit process and provide advice on any changes that you may need to make to your contractor recruitment process. We have in place all the relevant compliant contract models to support you and your business.
For more information contact us today.
T: 020 3725 4261 or E: [email protected]