If you carry out contract work or engage contractors, you’ll likely be affected by IR35 rules that are about to change. Gavin Dent, regional director at recruitment company Roc Search, explains what you need to know.
It might not be such a happy new year for businesses that aren’t already up to speed on changes in IR35 rules due in April 2020. The IR35 ‘off-payroll working’ rules will affect many businesses across the country.
What is IR35?
IR35 tax legislation is designed to combat tax avoidance. It was put in place to help HMRC detect ‘disguised employees’. These are workers supplying services via an intermediary, (usually the worker’s own limited company) but who would be regarded as an employee if the intermediary did not exist. If deemed ‘inside’ IR35, the worker must pay tax and national insurance contributions as if they were an employee.
Initially implemented in 2000, the responsibility for determining whether IR35 applies or not has historically rested with the worker. However, the rules in the public sector changed in 2017, shifting responsibility to the hirer. If the hirer considers that IR35 applies, the ‘fee payer’ (the company that pays the intermediary – this could be the hirer itself or a recruitment business) is responsible for making deductions for PAYE and employee NICs, and paying employer NICs.
These changes are now being rolled-out to the private sector and will affect all UK companies that have contractors working for them – unless the company has a turnover of less than £10 million and fewer than 50 staff.
What is changing?
With IR35 changes being rolled-out to the private sector from April 6 2020, companies will need to audit their current workforce. The new rules will apply to any payments made from April 6 onwards regardless of when the work actually took place. Hirers will also need to prove that the necessary steps are being taken to correctly determine each contractor’s IR35 status on a case-by-case basis (a process referred to as ‘reasonable care’, although precisely what this means is still unclear at this stage). If reasonable care is not taken, or if the hirer fails to provide an IR35 determination at all, then the fee payer’s liability will shift to the hirer.
How Roc Search can help
As a specialist technology and engineering recruitment business, we’ve already been working around the clock to ensure we make the transition as simple and cost-effective for our clients. All of our consultants have completed comprehensive IR35 training and we have set up a bespoke 24-hour project management team, guided by expert advice from our in-house legal team. We are also making a full IR35 solution available to our clients to ensure we can help with their needs.
The service we offer our clients has always been of paramount importance to us, and we have always made sure that we are able to evolve in response to market changes. We have not only the knowledge but the solutions in place internally to ensure our clients have everything they need to take on the new IR35 legislation.
How you can prepare for IR35
IR35 is going to dramatically change the business landscape and ensuring you’re ready for it is vital. Here are some tips to be prepared:
Identify individuals in your business responsible for carrying out IR35 determinations
Conduct an audit on your workforce to assess your liability
Speak to your recruitment partner about the solutions they can offer.
If you’d like to find out more about how we could help your business make this important transition, email Roc Search’s IR35 team: