IR35 C hanges and Opportunities - Elizabeth Norman International
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IR35 C hanges and Opportunities
Liz Norman ● ENI ● 32 years recruiting for the Insight, Data and Market Research professions. ● 10 years experience of recruiting temps and contractors. Temps on our payroll. ● New Contracting services; consulting, SOW, community.
Liz Norman Tina Holt
● ENI ● JT HR Solutions
● 32 years recruiting for the Insight, ● 20+ years working as a HRD within
Data and Market Research the recruitment sector
professions.
● 2 years as Independent HR
● 10 years experience of recruiting Consultancy
temps and contractors. Temps on
our payroll. ● Support recruitment businesses
with HR needs
● New Contracting services;
consulting, SOW, community.
When - What?
2000 - IR 35 originally came into force
2017 - off payroll working changed for the public sector
2021 - April 6 th applied to the private sector – will it come in? Legislation not yet past, already postponed.
IR 35 is tax legislation that is designed to combat tax avoidance by workers supplying their services to clients as a Ltd
company/Personal S ervice C ompany (PS C ). Individuals who have Ltd company status because they work for several
organisations.
Government expects to raise £1.9 billion in additional tax that is isn’t currently collecting from those individuals.
● National Insurance.
● Apprenticeship Levy
● Tax efficient dividends.
IR 35 rules are designed to assess whether a contractor is a genuine contractor rather than a ‘disguised’ employee for
the purposes of tax.
Employers/Fee Payer responsible if the correct tax isn’t paid
● From the 6 th April 2021 medium and large private sector business will be responsible for
determining the correct tax treatment on payments they make to individuals via intermediaries. Not
the individual doing the work.
● Doesn’t apply to small companies. A company is small if it has any 2 of the following:
○ Turnover of £10 million or less.
○ £ 5 million or less on it’s balance sheet.
○ 50 employees or less.
Gives an advantage to smaller companies, competing for the best contractors. C ontractors should
get ask for proof of a companies size.
● A contractor engaged now whose contract runs until after the 5 th of April 2021 may fall within the
new rules. Prepare now.
IR35 Changes Workflow
Is the Client (or fee payer) classed as a From 6 th April 2021, private sector
small business under the Companies businesses will be responsible for
Act 2006
determining the employment status
Must satisfy at least two conditions: Turnover less than
of any P S C workers they engage.
YES £10.2m, Balance sheet total less than £5.1m, Not more
than 50 employees NO
Changes in legislation Changes in legislation
do not apply do apply
Contractor continues to make
Is the Contractor working via an
their own assessment and work
through their PSC
YES umbrella /recruitment co.
NO
No Changes required Client needs to determine if role
The Contractor’s pay is already falls Inside or Outside IR35
subject to Tax & NICs through Client to use the key principles HMRC uses as
the umbrella company part of an IR35 test and document this in a
status determination statement (SDS)
INSIDE IR35 OUTSIDE IR35
Fee Payer is No change to current
responsible and liable arrangement
Client needs to ensure the correct Contractor continues to make their
amount of tax & NI is deducted own assessment and work through
from the contractor pay their PSCPaperwork (the boring bit).
● 1. Small? Ask for evidence, companies have 45 days to provide.
● 2. Inside IR35? The contractor can ask for E mployment S tatement Determination
which must state the reasons why the off payroll working rules apply to the worker, and
raise a dispute if disagree.
● 3. Outside IR35:
○ Insurance.
○ C onfirmation outside IR 35
○ Different contract, making it clear that the criteria for contracting has
been met and how.
○ Provide evidence of substitution.Opportunity to Think Differently
IR 35 is encouraging E NI, business and contractors to think differently. The introduction of this legislation to the private
sector doesn’t have to mean the end of contracting: it’s an opportunity to revolutionise operating models that can
future –proof medium and larger businesses.
B usiness can rethink the work it is outsourcing and contract out specific projects rather than employing contractors to
take on the work of full time employees.
S mall companies have an advantage when competing for skills.
Options:
PAYE , possible extra Tax will be due, additional costs and VAT burden on employer:
● Employers payroll – zero hours contract.
● ENI or other recruiters payroll
● Umbrella company payroll – FC S A and P rofessional P assport Accreditation.
C ontinue working as a contractor outside PAYE :
● C ontractor demonstrates Outside IR 35
● S OWOutside IR35
Criteria needed to show outside IR35
● R ights of S ubstitution
● S upervision and C ontrol
● Mutuality of Obligation
CEST tool (doesn’t assess mutuality of obligation).
Contractors must check
● C onfirm ability to substitute worker
● Get confirmation from the client that the role is outside IR 35 (S DS )
● C hange the contracts to reflect this.IR35 for Employers
● Use contractors inside IR 35. P ut on a payroll.
Ultimate rate the contractors gets is lower, unless rates paid increase.
VAT on payroll.
Additional costs over perm fee, margin on NI, holiday allowance.
● Demonstrate with confidence that they are outside IR 35. Using the consulting services of:
○ E NI working with specialists, so insured and documentation complete.
○ Insurers
○ S pecialist lawyers to check status, change contracts.
● E NI S OW and consulting.
C ontractor audit.
Identify the best approach to employing a flexible workforce. – S OW /outside IR 35/inside IR 35?
R esponsible for IR 35 assessments with advice from specialist lawyers and insurers, taking the risk and responsibility.
C ommunicate status, manage disputes.
R eview to support changes to the law and internal need.Anything missed? Any Questions? Liz Norman: liz@elizabethnorman.com Tina Holt: tina@jthrs.com.
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