For many businesses and contractors, IR35 legislation is familiar territory having been introduced back in 2000 to ensure off-payroll and on-payroll workers were taxed fairly. Changes to the law were originally planned for April 2020 but were delayed due to COVID. However the time has come for the government to revisit the proposed changes and the pending IR35 policy update has now been set for April 2021. If you’re confused about the changes, you’re not alone! Hopefully the below information and guidance is a useful snapshot for anyone not sure about the update.
What does it mean?
The change focuses on WHO makes the IR35 determination.
Currently contractors themselves are responsible for deeming their employment status and deciding whether or not they’re working outside IR35 rules. However when the new update begins, it will be down to the employing business to make that decision.
If the End Client is a small business, the decision remains with the PSC and Tax & NI responsibilities remain with PSC. (Small companies as s382(2) Companies Act 2006 defined as two of the following: Turnover of no more than £10.2 million, Balance sheet total of no more than £5.1 million or No more than 50 employees)
If the End Client is not a small business, they make the decision. They must provide a Status Declaration Statement and also have an in-house disagreement process in place. This is needed for any disagreements about the employment status determination. It’s important to note that having this process is a legal requirement! Tax and NI responsibilities also rest with the “fee-payer”.
Before any work can be carried out, the reasons and outcome will need to be properly documented and communicated. Keep records – You’ll need to make sure you maintain a robust audit trail. It is a legal requirement to keep records!
When do the new rules start?
The changes will come into effect on Tuesday 6th April 2021.
Next Steps
Make sure you fully understand the new changes ahead of 6th April! We know that the legal jargon can be confusing so last year we held various seminars in conjunction with Markel Tax Services to help clients understand what is changing. We have worked with Markel Tax Services since 2014 and now have on a retainer basis to protect both our clients and operatives across all sectors.
With their support, ARC have already sent various communications to clients and included useful documents and templates to help businesses navigate their way through the upcoming changes, such as Status Determination Statements for both in and outside of IR 35 and Status Monitor templates. Do get in touch if you’d like a copy of these.
In addition to information we have sent, we’d also recommend people take a look at the HMRC website. They have issued various guidelines, webinars and workshops to support companies with the new changes.
For any of our candidates or clients, especially within the driving or construction sectors, the pending changes will mean a new way of working and it’s important that you understand these and the obligations now required from you. Don’t bury your head in the sand! We’d highly recommend you test your new processes, systems and controls as soon as possible to make sure you’re ready!
Do you engage PSCs directly or indirectly?
No – nothing to do
Yes…
Are you a small company?
Yes – confirm to the agency – nothing to do!
No…
– Review IR35
– Contracts – ALL Contracts
– And working practices
– Do not make blanket decisions!
We are still here to help as best as we can, so if you have any questions please do get in touch.
