IR35 - Are You Prepared?

The new IR35 regulations will come into effect in April 2021. The depth of this reform and the shift in liability means it is crucial for companies to be aware of what the revisions mean to them.

Earlier this month Tier One Contracts staff joined an learning webinar on IR35, to learn more about how the revised HMRC regulations will affect workers and companies across the construction industry.

All our staff have a full understanding of what the changes are and how the revision will impact companies and individuals, meaning we can help clients current and new, to navigate the necessary changes.

What is IR35? The intermediaries legislation introduced in 2000, known as IR35, is a piece of anti-avoidance tax legislation to combat what HMRC call “disguised employees”.

What is a disguised employee? A self-employed worker who fills a perm position in a company but doesn't pay the corresponding income tax and National Insurance that a perm worker would.

What’s changing? The most significant change is the shift in who determines IR35. As of April 2021 this will be the responsibility of the End-Hirer, meaning they must determine if the Personal Service Contractor (PSC) is inside or outside of IR35.

If the determination is incorrect, the tax liability in the first instance will sit with the Fee-Payer, whether that is the End-Hirer or an agency.

NB: A PSC is commonly a limited company that is set up by self-employed workers, contractors and consultants to receive payment. Accordingly, the tax on these payments is lower than the PAYE rate.

Here’s how the process works:

SDS - Status Determination Statement

Obligations and risk on hirer to provide a summary of their IR35 decision that must:

-         Advise on the employment status for tax

-         Detailed reasons as to how the decisions were made

-         Be communicated to agency (if applicable) and worker

-         SDS must be prepared with ‘Reasonable Care’

Reasonable Care

Reasonable care requires hirers to take the necessary steps to correctly audit their self-employed workforce. The actual requirements for demonstrating reasonable care are yet to be confirmed by HMRC but we expect to receive guidance in due course.

Hirer-led challenge process

If the end-hirer does not agree with the final status determination form HMRC, a hirer-led status challenge process will be available. Through this, a contractor would be able to put forward evidence to appeal a decision.

Which companies will IR35 effect? It is important to know if your company qualifies as a small business if so, the new IR35 regulations will not apply to your company. To be recognised by HMRC as a small business you must be able to check off at least TWO of the following three points:

·      Company turnover is less than ￡10.2million

·      Balance sheet shows less than ￡5.1million

·      The company has less than 50 employees

If you cannot check at least TWO of the above, then you will need to begin preparing for the upcoming changes.

What are the next steps for companies effected? The traditional approach is to assess the contractor’s status based on the information available and then to rely on it to advise Tax Determination Status’ to HMRC directly.

But this is too simplistic. What if the assessment is incorrect? What if the contractor disagrees? What if HMRC challenge? Who would defend?

That’s why Tier One Contracts have partnered with our payroll and legislation experts to create the only solution that combines the best technology with specialist support.

How can Tier One Contracts help? We have prepared to ease your transition.

We can now confidently offer a range of services to ensure your company fully compliant and exempt from liability:

o  Free role-based assessments

o  Individual assessments (inc. SDS)

o  Your own branded IR35 tool to use company wide

o  Expert review of borderline results

o  Downloadable reports and recommendations

o  Integrated status disagreement process

o  Audit log for your records

o  Access to IR35 Protect insurance

o  IR35 training for your staff

o  Unlimited access to IR35 helpline

o  Full assessment of contracts

o  Support with events, webinars and client meetings

o  Regular tax and legal updates

o  Annual review & risk assessment

We understand the new regulations are complex and involve a huge workload in order to comply. That’s why we have taken every step possible to ensure we can prepare and protect our clients.

If you would like our unwavering support during the IR35 Regulations transition and beyond, please get in touch with us today:

E: [email protected] T: 020 3906 1650 W: www.tieronecontracts.co.uk

A very special thank you to Exact Payroll for all their continued help, support and guidance regarding HMRC and industry regulations.