Introduction
- This is our approach to all articles.
- With a change in IR35 rules in April 2020, we take a look at how this legislation might affect you.
- IR35 affects all contractors who do not meet HMRC’s definition of self-employment and those caught by the legislation will be subject to tax as an employee.
How Are The Rules Changing?
- Off-payroll working rules changed on 6 April 2020 and are applied differently.
- From this date, medium and large sized clients will be responsible for deciding the employment status of workers.
- For all public authorities the rules will continue to apply as before.
Who The Rules Apply To
- The rules apply to all public sector clients and private sector companies that meet 2 or more of the following conditions:
- you have an annual turnover of more than £10.2 million
- you have a balance sheet total of more than £5.1 million
- you have more than 50 employees
- Balance sheet total means the total amounts shown as assets in the company’s balance sheet before deducting any liabilities.
- This is in line with the small companies’ regime.
How Does This Affect You?
- The client is now required to check the employment status of a contractor and is responsible for ensuring that the correct application of the off-payroll working rules, if you are providing services via an intermediary.
- The client will need to decide the employment status of a worker and for every contract agreed with an agency or worker.
- They will also need to:
- pass determination and the reasons for the determination to the worker and the person or organisation being contracted
- ensure they keep detailed records of their employment status determinations, including the reasons for the determination and fees paid
- have processes in place to deal with any disagreements that arise from the determination
- If they are also the fee-payer and the off-payroll working rules apply, they will need to deduct and pay tax and National Insurance contributions to HMRC.
What To Do If The Client And The Worker Disagrees?
- A worker or the agency paying the worker’s intermediary may disagree with the employment status determination you reached.
- If this happens you will need to:
- consider the reasons for disagreeing given to you by the worker or agency paying their intermediary
- decide whether to maintain the determination if you feel it is correct and give reasons why – or provide a new the determination because you feel it was wrong
- keep a record of your determinations and the reasons for them, as well as records of representations made to you
- You must provide a response within 45 days of receiving notification that the worker or agency disagrees with your employment status determination.
- During this time you should continue to apply the rules in line with your original determination.
- Tell the worker if the determination has not changed.
- Tell the fee-payer and the worker if the determination has changed.
- Failure to respond within 45 days will result in the worker’s tax and National Insurance contributions becoming your responsibility.