IR35 For Contractors, Self-Employed and Medium To Large Businesses

IR35 has been in effect in the public sector since 2017. Changes were announced last July (11th July, 2019) to include medium and large companies (according to companies act definitions) in the private sector. The effective date of these changes is today. So, what do you now need to be aware of?

Self Employed or Freelance Contractors

If you carry out work for the same recruitment/agency or are self-employed or Freelancer and offer contract work, then these changes potentially will affect you directly. These are classed as off-payroll workers. As contractors and freelancers work patterns change, this is something you need to be aware of and constantly check to make sure you are compliant. The changes will affect those who are self-employed but choose to navigate the system to put them in a more beneficial tax position.

Changes are as follows:

Private sector clients will need to assess contractors IR35 status. Previously this was down to the contractors. This applies to contractors who work with medium or large sized businesses in the private sector. Contractors and freelancers working for small companies outside of the public sector will still be responsible for their own IR35 status. This is to help the small businesses from extra administration.

HMRC defines a small company as follows:

• Annual turnover must not exceed £10.2 million

• Assets outlined on the balance sheet must not total more than £5.1 million

• No more than 50 employees within the company

This is set out by Companies House, within the Companies Act 2006. Should your company exceed the above then you are considered to be a medium or large company, therefore will be responsible for checking your contractors IR35 status. Contractors can dispute their status with their client/agency should they feel it is incorrect. It is best practice to ensure all contracts in place are current and accurately state their role.

What this means is companies will need to determine the employment status of their contractors. Companies can check their obligations here. The rules for IR35 have remained the same, it is merely a change of ownership from the contractor to the end client (agency, medium to large businesses etc)

Today’s change to IR35 aims to reduce instances of disguised employment and the subsequent reduction in employment taxes being paid.

If IR35 is deemed to apply, the fee payer is responsible for deducting tax and NI from monies due to the contractor’s intermediary. Companies will therefore, need to keep a record of their determinations and inform their contractors of them or risk becoming liable for tax and NI due.

If you are unsure as to what your obligations as a company or a contractor/freelancer is, you can contact us and we will be happy to answer your concerns.

IR35 And What You Need To Know

Archive