There’s currently less than 3 months to go before new IR35 rules come into play that will have significant implications for businesses. They are of particular relevance to any medium or large businesses that use contractors, consultants, or self-employed individuals.
What is IR35?
The term “IR35” is the name given to a set of tax rules that cover “off payroll working”. They apply to any arrangements whereby a worker provides services to an end-user client company via an intermediary, usually a personal service company (PSC). Under the rules currently in force, the liability for assessing the correct tax position rests with the PSC. However, when the IR35 rules change, liability will shift from the PSC to the client.
Does IR35 apply to my business?
The new IR35 rules will have major consequences for client businesses who utilise contractors as they will have to decide whether the engagement falls within IR35. This is an important new obligation as it will determine which entity in the supply chain is responsible for operating PAYE on the fees charged by the PSC. It requires assessing whether the worker engaged by the PSC could be deemed to be the client’s employee and making a “status determination statement” confirming the view reached on that point.
The changes were originally meant to take effect last year, but due to the coronavirus pandemic the start date was pushed back to 6 April 2021. This means that time is running out for businesses to prepare for the changes.
What do I need to do?
With just a few months left, it’s time to ensure your IR35 preparations are well underway. Steps for businesses to take now include to:
- get familiar with the new rules and responsibilities;
- engage with key internal stakeholders, such as HR, Tax, Finance, and departmental heads;
- audit any arrangements that could potentially fall within the IR35 rules; and
- decide on the strategy to ensure compliance.
Businesses that engage with contractors should liaise with LexLeyton now to plan for and implement processes to ensure compliance with the new rules from 6 April 2021. If a free consultation around IR35 and its impact on your business would help you prepare, or to discuss any other HR or employment related issue don’t hesitate to reach out to us at email@example.com.