If your organisation engages contractors, you’ll have probably heard about IR35, the legislation that aims to ensure contractors pay the right tax. But changes coming in the new year are leaving many businesses unsure about how to manage their contracting workforce.
Contractors providing services to clients through an intermediary (usually their limited company) but found to be acting like employees, fall ‘inside’ IR35 and are charged the same tax and national insurance as employees on the payroll. For private sector firms, from April 2020 the responsibility will fall on the fee payer to determine IR35 status, reflecting the 2016 changes in the public sector.
If the following applies to your contractors, they may be at risk of being ‘caught’ by the legislation – and the business risks a hefty fine from HMRC if it wasn’t reported correctly.
- They are largely expected to work in a certain pattern eg being onsite 9 – 5
- In practice, it would not be possible for them to substitute another individual to do their work (even if their contract says they can)
- Their skills are deployed on different tasks and projects as required by the company
However, to be completely sure that contractors are falling outside IR35 rules companies will need to show reasonable care that each contractor has completed a ‘Status Determination Statement’ that declares a contractor’s status and the reasons for it.
Put simply when the new IR35 rules come in to affect in April 2020 if you haven’t taken reasonable care to ensure your contractors are complaint there will be significant consequences when HMRC catch up with you.
If you have any concerns about how the new legislation will affect your organisation, then Expand are offering an exclusive, no-obligation, free consultation with our trusted legal partner and IR35 specialist. During the consultation, you can understand how well you’re prepared for IR35 changes, and if there’s any other actions you should consider taking.
For more information, book a call with Expand’s Richard Edwards here.