IR35 is tax legislation that HMRC introduced in 2000 to combat tax avoidance. It is designed to determine whether a temporary worker should be classed as employed ('inside IR35') or self-employed ('Outside IR35'). If a worker is being paid on a Limited/Personal Service Company basis, but is found to be operating in what is considered an employed basis, they are ‘caught’ by this legislation and therefore will need to be taxed as if they are employed.
Just like the Public Sector in 2017, HMRC are shifting the liability. It will now be the responsibility of the Agency and/or the End Client to ensure the worker’s status is correctly identified. If found to be incorrect, HMRC can demand 'unpaid tax' from the Agency/End Client taking into account who the 'fee-payer' is and the status determination process. If an Agency/Client are paying many Limited/PSC contractors who are subsequently ‘caught’ by IR35, the tax liability suddenly becomes more significant.
Determining IR35 correctly can be very complex as many things need to be considered. One starting point is asking questions to confirm the nature of the work...
If the answer is mainly NO to the above, action is required!
“Small Companies” will be exempt from the change. Two of the following must apply:
Orbital have over 10 years’ experience in the temporary contractor/recruitment industries. We know our market well.
Our speciality applies to models that are PAYE or non-PSC self-employed focused throughout various contingent workforce sectors.
Why not speak to us about other compliant options for contractors including - CIS/Non-CIS Sole Trader, Umbrella PAYE, Joint Employment and the PEO model.
Or if you want, you can learn more about Orbital.
