There are important tax legislation changes coming in April 2020. If you are a medium or large sized business in the UK and use contractors to support and enhance your project capability, then the changes will have a significant impact.
From next spring, your business will be responsible for providing an employment “Status Determination” to your contractors, recruitment agencies and anyone supplying your business “off-payroll” workers.
The changes are only 6 months away. If you haven’t taken steps to prepare, then you’re probably a little behind. But you’re not alone.
There is a widespread lack of readiness across most sectors in the UK. In fact, our research indicates that most HR departments are lacking the knowledge to navigate these changes. Not really a surprise given that the liability has historically sat with the contractor.
But it’s not all doom and gloom. We believe that IR35 presents opportunities. With a sensible and well thought out plan (and a bit of effort), these changes will ensure you are best placed to capture the top consultants and specialist skills in your market.
IR35 was introduced in 2000. It’s a set of UK tax rules stating that contractors providing services through an “intermediary” are required to apply to their contract assignments to determine if the revenue gained from the contract is subject to full income tax and National Insurance Contributions - as if they were employed by the client.
The intention is to ensure that contractors working as ‘’disguised employees’’ pay HMRC broadly the same tax and NICs as if they were employees.
As it stands, the HMRC and HM Treasury believe that many contractors use their limited company to disguise their actual employment with their clients in order to be more tax efficient.
However, it’s important to note that the changes are not designed to penalise or impact contractors providing services in a truly independent fashion.
If your business is in the private sector and meets two of the three qualifying criteria below, then the IR35 changes will apply to your organisation:
If you don’t meet two of the criteria, then you are classed as a “small business”. This means that you’re excluded from the changes and the contractor remains responsible for IR35 - as they are today.
The reform doesn’t change the IR35 tax rules. But it does mean a shift in the employment status responsibility and therefore the liability from the contractor, to the organisation receiving the contractors’ services.
Failure to correctly determine whether a contractor falls ‘’inside’’ or ‘’outside’’ will result in organisations being liable for the underpayment of the tax and National Insurance Contribution of the contractor, plus likely fines levied from HMRC.
Since 2000, IR35 cases brought to the Courts by HMRC have been largely unsuccessful. But these legislative changes are clearly expected to provide HMRC larger and easier targets to investigate. And HMRC and HM Treasury will take a very unforgiving attitude towards tax evaders.
It might be that you’re still trying to make sense of IR35 or need a hand devising a strategy. Or maybe you just want someone to help with the heavy lifting, in a clear and logical way.
Regardless of where you are with IR35, BPS World can help. We have a dedicated compliance team with expertise in IR35 and are working hard with our clients to make sure they’re ready.
Our aim and belief is that the companies that understand IR35 and embrace the changes will make themselves far more attractive to genuine, professional contractors.
If you’d like some help with IR35 or want to learn more about us, get in touch for a free, no obligation consultation. You can get reach me on +44 7887 564816 or you can email me at: email@example.com.
The IR35 reform in 2020 will impact medium and large UK businesses engaging contract workers. Are you aware of the changes and what they will mean?
In this blog I examine:
The Sunday Times, Top 100 Best Small Companies to Work For (2019)
Best Companies, Top 75 Best Companies to Work For in the South East (2019)
Best Companies, 3-Star Accreditation (2019)
LinkedIn, Top 25 Most Socially Engaged Staffing Agencies (2016, 2017 & 2018)
Marketing & Digital Recruitment Awards, Best Recruitment Website (2018)
IRP, Best Recruitment Apprentice Award (2016 and 2017)
IRP, Best People Development Business Award (2017)