How to prepare your business for the IR35 changes
The delayed changes to the off-payroll (IR35) scheme are due to come into force on 6 April 2021 it is important that businesses do not underestimate their new obligation to assess the status of any contractors they employ.
It is important that businesses who will fall under the expanded scheme start preparing now for the changes ahead, and don’t leave it until the last minute. You need to make sure your organisation is fully prepared ahead of the introduction of the new rules, and are clear on the status of your contractors.
With this in mind, we’re offering fixed-fee contract reviews to help guide you through the new rules
What is the IR35 scheme?
From 6 April 2021, the IR35 scheme will be expanded to medium and large private sector businesses.
These are defined as organisations where two of the following apply: an annual turnover of over £10.2m, a balance sheet of over £5.1m or more than 50 employees
What are the new IR35 changes?
The IR35 rules are essentially anti-avoidance tax legislation, designed to tax “disguised employment” at the same rate of normal employment.
Previously, these rules only applied to public sector companies, and it was the responsibility of the contractor to complete the IR35 assessment.
You can catch up on our recent webinar on what changes are expected.
How will IR35 changes affect me?
Companies that use contractors (i.e. the end-users) will now need to determine their contractor(s) employment status and provide them with a Status Determination Statement if an employment relationship is established - deduct tax and NICs at the appropriate rate
Whether an employment relationship arises depends largely on the contractual arrangements in place.
If the contract includes a right of substitution, avoids an obligation to provide/ accept work, is structured by reference to completion of a project or piece of work and avoids integration (i.e. the provision of a work uniform or email account), then it is likely to constitute genuine self-employment and won’t be subject to the off-payroll rules.
However, the reality of the working situation needs to be considered on a case by case basis and we are on hand to assist with the factors that HMRC will be looking for and to assist with your status determination requirements.
Get this wrong and the off-payroll rules will apply, resulting in additional tax and NIC liability, together with the possibility of HMRC being able to pursue the end user and to look more in depth at how the business works with contractors.
When making the determination statements for your contractors, you should use the HMRC check employment status for tax (CEST) tool. However, it is important to be aware that it is not unusual for a status to be “unclear”. If you are unsure, it is imperative that you take independent legal advice.
How we can help
Our team of expert employment solicitors partner with your business to understand your goals, as well as any difficulties you face, and apply their knowledge to your specific set of circumstances and are perfectly placed to help review your contracts for your contractor staff. Read more about our employment contract services.
How our fixed fee service works
For a fixed price you will receive the following:
An assessment of the contract and working arrangements for your self-employed contractors
A dedicated team of experts who will provide you advice on likely status and implications
Updated and compliant contracts for your contractor staff
*This fixed-fee is applicable to the contract review and legal opinion only. Any ancillary work done will be charged at the appropriate rate agreed on engagement.
Want to find out more or have further questions? Contact us today using the button below.
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