NEW IR35 rules are now in force from today, after being delayed last year due to the COVID-19 pandemic. Here’s a refresher on what the changes mean and how you can best prepare yourself for the implementation of IR35 in the workplace
WHAT’S CHANGING WITH IR35?
- Pre-IR35 the contractor was responsible for determining their status (i.e., whether they are genuinely self-employed or, to all intents and purposes, an employee) for any given engagement. They were also liable for paying the correct tax and National Insurance contributions for each engagement. This will continue to be the case if clients are classed as small businesses. The reforms only affect contractors with medium or large clients.
- The reforms mean that for engagements after 6th April 2021, the end client becomes responsible for determining a contractors IR35 status, which they will do by issuing a Status Determination Statement (SDS). The contractor will have the right to dispute their SDS if they don’t agree with it – the client has 45 days to respond, although they do not have to make changes.
- The liability for correct tax and national insurance contributions will transfer to the fee payer. This could be the end client or it could be an agent or recruiter. So, if you are found to be inside IR35 (and therefore considered a disguised employee) the fee payer will deduct tax and NICs at source using PAYE at the same rates as an employee (but without any of the core benefits). If a contractor is wrongly placed outside IR35 and this was investigated by HMRC, it would be the fee payer who would be liable for outstanding taxes as well as any interest and penalties.
- For engagements outside IR35, the contractor will continue to pay tax and NICs through Self-Assessment.
WILL THESE CHANGES TO IR35 SPELL THE END OF CONTRACTING?
In short, no. The delay caused by Covid-19 has given contractors and businesses extra time to prepare for the reforms and contractors, clients, and internal recruiters are all telling us they now feel more confident to manage the requirements of IR35.
Additionally, the economic situation after the pandemic means that contractors will be a desirable alternative to permanent employees as they try to save money and so we expect to see increased opportunity for contractors in spite of the reforms.
HOW BROSTER BUCHANAN CAN HELP
ORBBIS IR35 PROTECT is a comprehensive and market-leading assessment and insurance solution that protects the IR35 determination (the SDS) for the end-client. This is also underwritten by Zurich insurance to protect the determination.
Additionally, as part of our service we can ensure outside IR35 contractors have the most comprehensive insurance at a competitive price that will cover you for £100k tax cover and £100k legal cover. Please click on this link for more details and to get a quote.
Not only does this Zurich underwritten insurance protect the contractor in the run up to April 2021, but it’s designed to flex come the reform deadline to cover the fee-payer as well. This means that the entire supply chain is protected; for up to £100k legal defence costs and £100k tax liability, as well as providing a legal expenses policy against the potentially crippling costs of an IR35 enquiry and any tax debts found owing – guaranteeing peace of mind for the contractor and for the client.
If you are an existing contractor or client of ours, we will be in touch with you to start conversations about reviewing and assessing your working practices to make sure you’re prepared come April 2021.
Whatever your circumstances, you can speak to Broster Buchanan about your requirements around IR35. Contact us at firstname.lastname@example.org and our friendly, expert team will do everything they can to help.
Click here to find out more about ORBBIS IR35 PROTECT.