01 Apr 2021
IR35 refers to the off-payroll working rules being put in place to ensure that contractors working for companies and those companies themselves are paying the correct level of tax and national insurance.
These changes will mirror rules that apply in the public sector and place the onus on businesses to ensure HMRC compliance, whereas previously the onus was on the individual supplying his/her services through their company.
HMRC believes that thousands of people employed via an intermediary or via a Personal Services Company (PSC) have been paying incorrect tax, meaning the Treasury is missing out on income tax and national insurance contributions from both the workers and the company employing them.
These changes will fundamentally change the operation of IR35 by making the end client responsible for assessing a consultants employment status and applying the correct PAYE withholding.
From 6 April, all medium and large-sized businesses in the private sector will be responsible for deciding whether IR35 rules apply. The correct categorisation of each individual’s employment status will be critical because it impacts on their employment rights and the correct taxation of payments made to them.
Organisations can face potentially significant penalties by incorrectly treating individuals as self-employed rather than employees or workers and/or by misapplying the rules relating to IR35 once the changes are implemented.
In order to prepare for the new rules coming into force on 6th April, the end-user must take reasonable care in making an assessment and confirm its assessment together with reasons in a Status Determination Statement (SDS)
To prepare for this you should;
For help with preparing your status determination assessments, our employment law team can assist both contractors and businesses. Please contact Daniel Wilde on firstname.lastname@example.org or 01633 244233.
More from the Harding Evans blog:
‘Changes to the IR35 Rules’, 30 May 2019
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