Devonshire is here to help navigate our clients and candidates through the IR35 changes and ensure they are prepared. Our on-site Contracts and Compliance Coordinator, Amrit, talks through the upcoming changes and answers helpful FAQs.
IR35 is the anti-avoidance tax legislation and applies to individuals supplying their services through an intermediary, usually a limited company or PSC (Private Service Company).
What will change?
IR35 itself hasn’t changed, the current IR35 legislation seeks to ensure that contractors working through their own PSCs pay employment taxes and NICs. From April, the status determination will move from the contractor to the end user. This determination will be passed down the labour supply chain (end user, recruitment agency, (umbrella provider) and contractor (PSC)). The end user must take reasonable care and has the legal duty to decide if the IR35 rules apply to an assignment, ideally when the role is made available, but no later than the first payment date.
What does IR35 mean for end users (clients)?
Clients will have to run status checks to determine the IR35 statuses of contractors, these can be done via the HMRC online CEST tool.
What does IR35 mean for contractors?
If the assignment is found to be Inside IR35, Devonshire will deduct the tax and NICs from the gross amount payable. The PSC is no longer responsible for this. The PSC will still need to ensure that they are assessing their assignments (these can also be done via the CEST tool).
If a contractor disagrees with an IR35 determination from the end user, then they can appeal the decision and the end user will have 45 days to respond including the reasoning for their decision.
What does IR35 mean for umbrella providers?
Umbrella providers will have the responsibility to ensure that the PSC has the correct payroll administered with regards to the assignments in hand. They will deduct tax and NICs as they will be the fee payers.
How can the employment status of a worker be assessed?
HMRC provides an employment status tool, called CEST. The end user will need to assess and determine a status for each individual assignment. They should not use a ‘blanket’ rule as this shows a lack of due diligence. The end user will need to inform the supply chain of the IR35 determination.
Impact of the changes
Inside IR35: The fee payer (recruitment agency/umbrella) will be responsible for deducting tax and NICs when processing worked days/hours for PSC contractors.
Outside IR35: The fee payer will process the invoice as normal for PSC contractors – no statutory deductions will be made. It will be the responsibility of the PSC to ensure all statutory payments are made.
Do you still have questions? Please feel free to contact: 0203 047 4563 or email [email protected].