IR35 is a piece of legislation originally introduced in 2000 to ensure those individuals hired by a business, who would ordinarily be deemed ‘employees’ - if they had been engaged directly - broadly pay the same amount of tax and National Insurance as employees. Businesses for many years have always been obliged to undertake the ‘self-employment v employed’ test but IR35 specifically fell on the individual (worker) who provided their services through an intermediary (e.g. through another a company) to another person or entity.
The rules for individuals operating through Personal Service Companies (PSCs) have been updated a number of times since the introduction of IR35 in 2000.
The Government and HMRC first introduced changes in 2017 when the rules were changed for those PSCs contracting with public bodies. In the most recent reform, in April 2021, those PSCs who now have contracts with medium or large end clients will find that the decision over how they are taxed is now decided by the client and not the PSC.
Who does it apply to?
For those businesses who fall into the medium/large category i.e. two or more of the following: £10.2 million+ turnover, £5.1 million+ balance sheet, 50+ employees, a very close assessment must be made of those working on behalf of the business and vice versa. There are added complications too in the way the financial year and calendar year figures are calculated.
How we can help
- Review arrangements and provide clear guidance on the impact of the new rules
- Review contracts with end clients in line with HMRC Check Employment Status Tool (CEST) and provide feedback
- Provide training to end clients on assessing the status of the PSC
- Provide oversight of the appeals process for both the end client and PSC
- Examine the current structure to ensure that this is tax-efficient
For more information and advice on the IR35 'Off Payroll Working Rules', please contact one of our team
Call: 0808 144 5575
