IR35 Hub - Everything You Need To Know | Futurelink Group

What does IR35 mean for Intermediaries & end-client businesses?


The changes expected in April 2021 will impact all of those in the employment food chain. As with the Onshore Intermediaries legislation, where staffing, labour suppliers and payroll companies had to vet all self-employed contract workers, the responsibility will be placed on the end-client or project management company to qualify worker status. This will have a knock on effect to all those involved – especially the worker. Their rate of pay will be reduced by 13.8%, the cost of employer’s National Insurance, along with other employment costs.

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The new changes mean that recruiters and businesses need to re-evaluate their workforce and decide whether workers fall in or outside of IR35 (link to section what is inside what is outside) by assessing their workers' employment statuses.

Support is provided to help make this appropriate decision. Businesses can utilise the CEST tool provided by the government to determine worker’s status. The CEST tool also known as “Check Employment Status for Tax” questionnaire was designed by HMRC in March 2017 to help businesses determine whether workers are classed as employed or self-employed for tax purposes.


What happens if workers are inside or outside of IR35?


Inside:

Where an assignment is deemed ‘inside’ IR35, PAYE deductions must be made from the contractor's pay. Whether this results in the contractor becoming directly employed or whether businesses make a decision to utilise umbrella companies to make sure the right levels of tax are deducted and that businesses remain fully compliant, preventing any HMRC potential fines.

Outside:

Any assignment ‘outside’ IR35 is classed as a genuine B2B (business to business) service and is therefore not subject to the same tax treatment as employees. Contractors and businesses can continue to work, assign and pay the contractor as normal. Find out more on what criteria makes a worker outside IR35 here.

So how will this affect contractors and businesses?


If workers are considered as inside IR35, contractors will need to pay the same income tax and NICs as if they were employed. The new changes to IR35 in 2021 will have a serious financial impact on the contractors' earnings, reducing net incomes by up to 25%.

Respectively, this will have a financial impact on businesses as they will need to make appropriate changes to remain compliant, contributing Employer’s National Insurance and providing holiday and sick pay, as well as incorporating the worker on their company pension scheme.

Futurelink can help to mitigate the costs. We can help by offering free expert advice and a number of payment options suitable for those in or outside of IR35.

To find out more please contact us now or find out what it means to be inside or outside of IR35 here.

What is a 'blanket' decision?


In relation to IR35, a blanket decision is when the end-client decides that all contract workers helping on a client’s project automatically fall in or outside of IR35 regardless of the work being performed. The decision may be made due to a lack of understanding or not having the resources to conduct accurate IR35 status reviews when engaging suppliers and contract workers.

End clients will be required to provide a “Status Determination Statement” which details the decision made. This is designed to increase accuracy and eliminate any blanket decisions that could be made. The uncertainty and extra work entailed due to the legislation, is likely to force the end-client to insist on a PAYE status, thereby avoiding unnecessary fines or NI’er liabilities.

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