Latest Update (March 2020)
On the 17th March 2020, the Government announced that the changes to the off-payroll working rules would be delayed until April 2021. This is a deferral and not a cancellation in light of the Coronavirus outbreak to help businesses and individuals in the current climate. The Government is committed to this policy, and it will come into force from April 2021.
This means that contractors will retain the right to determine their own IR35 status when working in the private sector until 6th April 2021.
As a result, medium and large private sector end-clients will not become responsible for administering the IR35 rules for 12 more months. The IR35 liability, which was due to transfer from the contractor to the fee-paying party in the supply chain, will remain with the contractor until next April.
We recommend that you contact your client and agency with regards to your status and assignment and ensure that you have a clear channel of communication.
Introduction to IR35
HM Revenue and Customs (HMRC) introduced the ‘intermediaries legislation’, which became known as IR35, in the 2000 budget. The legislation was introduced to combat ‘disguised employees’. This refers to an individual who would be treated as an employee were it not for the fact that they provide services via their own personal service company (PSC), and paying less tax in the process.
In 2017 the Government shifted the responsibility of determining the status of contractors to organisations in the public sector.
In 2021 the same reform will be rolled out in the private sector and from this date, medium and large businesses (and similar unincorporated bodies) hiring contractors will be liable to determine their off-payroll worker’s status.
What does it mean for you?
If you currently trade through your own limited company (Personal Service Company or PSC), you may be concerned about the changes arriving in 2021.
As we mentioned above, from April next year medium and large-sized businesses will be responsible for determining the IR35 status of the contractor; if you are in engagement with small business, then the assessment process stays with you – the contractor.
What you can do to prepare:
- Intentions – Open a discussion with your client to see what their plans are since after the reform, it will be their responsibility to determine your status.
- Your status – Check your status using HMRC’s CEST tool, which may not be perfect, but enough to give you an indication. We recommend having a professional review done for complete peace of mind. Qdos Contractor offers a discount to our clients, so contact your accounts manager for contact details.
- Speak to your agency/client – Talk to your agency or client and ask/encourage them about getting on board with the process. This can help you down the road and let you continue with your assignment with a compliant organisation and without interruption.
It is worth noting that nothing will change until the legislation is actually in place in April 2021. Until then, contractors are still responsible for determining their own status. If your end client is a small business, nothing will change even after the reform.
Contractors Inside IR35 – Working with SmartWork
If a contract is deemed to be inside IR35 working through an umbrella company such as SmartWork could be the perfect solution.
The primary function of an umbrella company is to organise payment for fixed-term work undertaken by independent contractors. When signing up with an umbrella company such as SmartWork, contractors become one of its employees with it acting as an intermediary between them and their agency, or directly the end client if no agency is involved.
Through our sister company SmartWork, we provide a full package with a host of additional benefits.
- We process statutory sick pay, maternity/paternity and holiday pay and can assist you with mortgages advice and references.
- We also cover you for all of your work-based insurances, including Professional Indemnity and Employers/Public Liability.
- We pride ourselves on our personalised service with a dedicated account manager allocated to each contractor. Contractors have access to our SmartWork portal, allowing them to upload timesheets, submit expenses and e-sign documents easily.
- In terms of compliance, SmartWork is a fully accredited FCSA member, undergoing a yearly audit demonstrating our compliance with the trade body’s strict code of conduct.
Umbrella & Limited Dual Service
Should your current engagement fall inside IR35 and you wish to keep your company for contracts outside IR35, we offer an option for you to do just that. With a fixed monthly fee of £95+VAT, we will oversee your umbrella income and also look out for your limited company, so that it is ready for you to pick up where you left off.
It is important to remember that despite the changes in legislation, working outside IR35 and via a limited company is still the most tax-efficient way of trading.
How can we help with your IR35 queries?
As a compliant accountancy practice, we have a duty of care to our clients when it comes to IR35, and keeping them updated with all legislation is a part of that commitment.
For your review and insurance needs we’ve teamed up with IR35 specialists Qdos Contractor, who have the knowledge, and expertise to conduct a full contract review granting you complete peace of mind. Trusted by over 40,000 UK contractors, Qdos offer a comprehensive range of policies, including professional indemnity, public & employers’ liability, tax liability insurance and much more covering the key risks you face every day.
They offer a 10% discount and FREE IR35 assessments to MyAccountant clients when you purchase insurance – an excellent way of demonstrating that you have operated due diligence in determining if your IR35 status.
Make sure that you contact your accounts manager for more details and get your unique code for the offer.
We are posting regular updates on our blog that can be followed via our LinkedIn page, but if you’d like to know more or need help with IR35, feel free to give us a call on 0800 917 9100 or e-mail firstname.lastname@example.org.