This simple plain-English guide for contractors explains the IR35 changes, how contractors will be affected, how to avoid IR35 non-compliance, and how Taylor Hopkinson are managing the IR35 reform. For further information on contracting, visit our contractor hub. This article has been updated to refelct the new dates. Small Company Exemption?
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This simple plain-English guide for contractors explains the IR35 changes, how contractors will be affected, how to avoid IR35 non-compliance, and how Taylor Hopkinson are managing the IR35 reform. For further information on contracting, visit our contractor hub.
This article has been updated to refelct the new dates. Small Company Exemption? Taylor Hopkinson remain available to discuss the planned changes and will be proactively working with contractors and clients in to ensure readiness and compliance before the new deadline of April On 7th February, HMRC announced a significant change in the application of the changes to the off-payroll working rules.
The new rules will now apply only to payments made for services provided on or after 6 April Previously, the new rules would have applied to any payments made to the PSC on or after 6 April irrespective of when the services were performed or the invoices were raised. This was a common issue raised by many contractors and businesses in the industry; there were concerns over the practical application of the rules after the commencement of services, or possibly after the assignment was complete.
Policy changes announced today also offer much needed clarity. Also, the rules will no longer apply to clients based wholly overseas, with the obligation to determine tax status in these instances remaining the contractor. During the review concerns were raised about how the rules will apply where the client is overseas.
The Government has listened to those concerns and will amend the legislation to exclude wholly overseas organisations with no UK presence from having to consider the off-payroll working rules. Following the introduction of IR35 reforms in the public sector in , HMRC has confirmed that the new rules will now be extended into the private sector, effective 6th April These changes are not retrospective.
IR35 rules were originally introduced in the UK in , with the intention of ensuring that individuals who are working like employees but who operate via an intermediary, such as a personal service company PSC , pay broadly the same tax and National Insurance Contributions NIC as an employee would. Consequently, HMRC estimate that there is widespread non-compliance which they have been unable to effectively tackle. Under current legislation this is broadly a business that has two or more of the following features:.
HMRC have confirmed that they are making enhancement to the CEST tool, these changes are expected to be delivered before the end of The off-payroll rules apply if as a worker you provide services to a client through an intermediary your personal service company PSC but would be classed as an employee if you were contracted directly with the client. From 6th April , how the rules are applied will change. All public sector authorities and medium and large-sized private sector clients will be responsible for determining whether the rules apply — i.
If the client does not exercise reasonable care, the status determination statement will not be valid, and the client will be liable for the unpaid taxes. The options are:. If the off-payroll proposals are legislated in their current form, where HMRC disagrees with the determination made, it can investigate and insist on back payment of tax, as well as fines for late payment from the fee-payer.
We are preparing for the proposed new rules and monitoring all Government and industry announcements throughout late and into Final announcements around updates have yet to be clarified, however, we are regularly attending seminars and open sessions, monitoring news from Government consultation process, as well as research and planning internally and through external advisors;.
The Off-Payroll Working Rules will still apply irrespective of how many clients and assignments a contractor is working on. However, your IR35 status is assessed on an assignment basis — working for multiple clients is not a significant indicator of being in business on your own account; the IR35 status for each assignment is judged on its own merit.
From April , all public sector authorities and medium and large-sized private sector clients will be responsible for deciding whether IR35 applies. We will continue to engage with our clients and you as a contractor regarding the new rules to help to ensure that all parties are prepared for April If you are providing services to a small private sector client, they will be exempt, and they are not required to follow the new IR35 rules. However, there is no statutory right for a contractor to be consulted during the status determination process.
The client must respond to a request to review the status determination statement within 45 days. The client must either confirm the determination is correct, with reasons, or provide a new status determination statement reaching a different conclusion and withdraw the previous one. You need to ensure you keep records of status determinations and any corresponding disagreements. Depending on your contractual terms, there may be scope for the rate to be negotiated accordingly. You may receive these benefits through your employment in your PSC.
Under AWR, you are entitled to comparable pay to a permanent employee on the client site. If you opt to engage via an umbrella company, you are an employee of the umbrella company and therefore you will benefit from employment rights and AWR will apply. The month rule is in reference to claiming travel expenses.
This rule has no bearing on the IR35 status of an assignment. To determine whether a contractor will fall Inside IR35, key criteria are reviewed to establish employment status. A decision is made about a hypothetical contract between the contractor and the end-client, and whether, if those two parties were contracting directly, there would be an employment relationship.
However, the route to determining employment status is fact-specific and in some cases, there is no clear outcome. For a substitution to be considered valid, the right to supply a substitute must be a genuine one.
This means that the client must agree to it in practice, the contractor must pay for the substitute, and it should be an unfettered right. An unfettered right of substitution means that a client must accept a substitute if the initial contractor is unavailable. In most cases where professional services are provided, it is important that a contractor can demonstrate a certain amount of autonomy in the way they undertake a project.
The reality of the situation is that the individual is responsible for the delivery of the services. The individual will determine and control how and when they provide their services to the client, if they meet client-specific targets or project completion dates.
It is worth noting that any clauses referring to control should be reflected in both the first tier between recruitment business and client and the second-tier contracts between recruitment business and contractor. This is a hotly disputed area of law, as the position of HMRC is different from that of many practitioners and case law.
It is an obligation between the parties to provide and accept work. HMRC states that by having a contract agreeing to provide services, mutuality is established but most experts consider the legal picture to be more complex. It is likely there will be more clarity on this in the coming months. Other factors include:. Taylor Hopkinson Finance Team and Contract Support team remain the same — with familiar internal support function able to manage contract updates and any queries through initial pay runs.
Taylor Hopkinson are absorbing the setup, integration and licensing costs for RSM In-Pay system, and our professional Finance Team are resourced to be able to provide ongoing service and support through this time of change to both Clients and Contractors. A commitment will be made by Taylor Hopkinson to deduct and remit all required Taxes and NI monthly in line with legislation. This will include availability for audit and review of contractual templates at any time.
Call Email. Renewable Energy Jobs. IR35 Changes Guidance for Contractors. New IR35 changes will be implemented in April for private sector contractors that will transfer responsibility from contractors to large and medium companies to assess IR The reform will bring private sector IR35 in line with the public sector, where the reform was implemented in Or read all about it below.
Government Updates — February On 7th February, HMRC announced a significant change in the application of the changes to the off-payroll working rules.
What is the proposed change to IR35? The deemed employment pay rate is Income after deductions, including both employee and employer NICs and the Apprenticeship Levy only where relevant. No fees apply to the contractor for this service. Umbrella Company Employment — Where an umbrella company employs a contractor as a worker directly, the off-payroll working rules do not apply. Weekly Fees Umbrella fees apply, however these also include insurance cover and other benefits.
Incorrect determination If the off-payroll proposals are legislated in their current form, where HMRC disagrees with the determination made, it can investigate and insist on back payment of tax, as well as fines for late payment from the fee-payer. What are Taylor Hopkinson doing now to prepare for the IR35 changes? Final announcements around updates have yet to be clarified, however, we are regularly attending seminars and open sessions, monitoring news from Government consultation process, as well as research and planning internally and through external advisors; Taylor Hopkinson have formed a working group internally across Finance, Operations, Contracts, Compliance and Senior Management functions, and meeting regularly to review and plan strategy.
We are committed to continuing to provide a professional service proposition to you and will work to retain compliance and transparency throughout this time of change. Determining whether the assignment is inside or outside IR35 To determine whether a contractor will fall Inside IR35, key criteria are reviewed to establish employment status.
Control and Direction In most cases where professional services are provided, it is important that a contractor can demonstrate a certain amount of autonomy in the way they undertake a project. Mutuality of Obligation This is a hotly disputed area of law, as the position of HMRC is different from that of many practitioners and case law. Share on linkedin. Share on twitter. Share on facebook. Share on whatsapp.
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IR35 rules for private sector will not be retrospective
IR35: Update on changes to the private sector off-payroll working rules
As intimated by the Chancellor of the Exchequer during the election campaign , in response to concerns about the difficulty of assessing the tax status of contractors, the Government has launched a review into the implementation of anticipated changes to the off-payroll working rules IR35 Rules. These changes, as currently proposed, will extend the rules to medium and large sized businesses in the private sector and require those private businesses to determine whether or not a contractor is self-employed or an employee for UK tax purposes. For an outline of the proposed changes, please see our earlier article here. The review is expected to conclude by mid-February. However, as the review is focused on how the private sector rules will be implemented and making this as smooth as possible and there is no indication that the targeted implementation date will be delayed, it seems likely that the 6 April implementation date remains unchanged.