Are you ready for IR35?

The new world from April 2021

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Oct 21, 2020
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April 2017 saw a significant change in IR35 legislation applied to Public Sector working practice. April 2021 will see the same 'Off-payroll' enforcement applied to the Private Sector.

Firstly… What is IR35?

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.

What is changing in April 2021?

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.

What determines IR35 status?

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...

  1. Does the contractor pick the hours/days they work?
  2. Can the contractor send a ‘substitute’ or another worker if they’re unable to work one day?
  3. Does the contractor provide all of their own equipment to complete the job?
  4. Does the contractor supervise themselves and dictate how they work?

If the answer is mainly NO to the above, action is required!

Are all End Clients liable?

“Small Companies” will be exempt from the change. Two of the following must apply:

  • Annual turnover less than £10.2m
  • Balance sheet less than £5.1m
  • Number of employees less than 50
Resources:

Compliant payroll options for life after IR35

Understand the different payroll options available to you after IR35 and how Orbital can help.

What do companies need to do?

  • Audit your workforce’s operating structures. How many are PSC’s?
  • Either have a status determination process in place or look at what compliant contracting alternatives are available post April 2021. This is where Orbital can help!
  • Confirm the options on offer for contractors.
  • Start implementing changes for the candidates to move into compliant models by early 2021, if required.
  • Risk assess the current supply chain and update supply chain contracts.

How Orbital can Help

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.

E: compliance@orbitalservices.co.uk

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