Employed or Self-Employed (IR35)?

Introduction

• With IR35 rules changing from 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 change 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. 

Useful Links

• Check Employment Status for Tax (CEST) 
• IR35 – Off Payroll Working