IR35 Are you in or out?

IR35 is coming for the private sector and you can’t avoid it. But what do you need to know to make sure that your business is operating on the right side of the law and ready to embrace the changes coming? In our latest blog you’ll find out what the implications of IR35 are, who it will affect, when the change is coming and how we can help you prepare.

What is IR35 and Why Is It Being Reformed?

IR35 is a piece of legislation that has been in force since 2000, it was designed to ensure appropriate tax contributions were made by workers and their clients. Those workers are specifically supplying their services to their clients via a Limited Company or similar, but would ordinarily be classed as an employee if that intermediary did not exist. The legislation in its current form means that contractors are responsible for determining their own IR35 status. The Government found that almost 90% of contractors were choosing to classify themselves as outside the scope of IR35 and that some ￡1.3bn in taxes was lost as a result. The reform will place the burden of determining IR35 status onto employers instead.

When is IR35 (in its new form) Coming?

If your firm hires contractors who have their own Limited Company then now is the time to get clued up on the new IR35 rules (Off-Payroll Tax) as the changes will be coming into effect in just six months time, from April 2021. The changes were due in April 2020 but postponed due to the Coronavirus Pandemic.

Who will IR35 apply for?

The rules will apply for all businesses, in both the public and private sector, if the organisation meets two or more of the following criteria:

●    you have an annual turnover of more than ￡10.2 million

●    you have a balance sheet total of more than ￡5.1 million

●    you have more than 50 employees

If My Business Fits The Criteria What Does It Mean?

From April 2021 you will need to assess each worker you have an engagement with, who is not an employee, and decide if the new IR35 rules will apply. The Government has created a ‘Check Employment Status for Tax’ tool to help you assess each contract that you have in place. If it is deemed that the IR35 rules apply to an individual that you have contracted then you must deduct income tax and employee National Insurance Contributions from their pay and also make employer National Insurance Contributions.

Help?!

If you’re not sure where to begin with IR35, in its current or future form, then reach out to us. At Backoffice Nationwide Ltd, we have worked with clients of all sizes and have experience in managing payroll for employees and contractors alike. We can help guide you through the process of checking employment statuses for the contracts that you have in place and set up robust systems to ensure that you are making the correct payments and deductions accurately and on time.