Following the Chancellor's budget announcement, we must now assume that the IR35 reforms in the private sector will continue to go ahead as planned on 6th April 2021, and end hirers need to ensure they are all fully aware of how their responsibilities are changing.
What is IR35?
IR35 is a piece of legislation designed to tackle what the HMRC have called ‘disguised employment’. Using a number of factors, it aims to differentiate between PSC contractors who are genuinely in business on their own account and those who should be considered employees for tax purposes.
What does it mean for you?
As of April 2021, it will be the responsibility of the end hirer to assess the employment status for tax purposes of all PSC contractors. In line with the legislation, you are required to take reasonable care in doing so, which means you need to properly assess the status of your contractors, provide a determination, and provide an explanation behind your decision.
What should you do now?
Time is ticking but there is still time to make sure your business is fully compliant with the changes to the IR35 legislation using the following steps:
Assess your workforce. You’ll need to know how many contractors are working through a limited company, where there are, and what they do.
Consider your options. There are a number of ways in which you can make your status determinations, including using a third-party provider or utilising the HMRC’s Check Employment Status for Tax (CEST) tool, so you’ll need to decide which one is right for you.
Carry out your Status Determination Statements. To get the most accurate assessment on whether or not a contractor should be considered Inside IR35 or Outside IR35, you should be liaising with the contractor themselves and their key points of contact within your business, so communication is key.
Pass the Status Determination Statement down the supply chain. Your responsibilities under the legislation require you to pass your decision and the reasoning behind it to all interested parties, namely the contractor and the agency who engages them.
Communicate with your supply chain. It’s important to protect yourself by ensuring any recruitment agencies within your supply chain are complying with the decisions you have made and are deducting PAYE Tax and National Insurance Contributions as required.
Reassess when needed. You need to assess the IR35 status of PSC contractors any time any element of the worker’s contract or their working practices change. Depending on the nature of their engagement, you will also want to reassess every six to twelve months to ensure you and they are still compliant with the legislation.
If you're unsure about any of the above, or require some advice and support on how to assess your contractors, get in touch with our specialist team as soon as possible to ensure you're IR35 compliant.