IR35 and ‘Off Payroll’
In April 2000, HMRC introduced the Intermediaries Legislation also known as IR35, as a way of combating abuse by individuals and companies of the individuals’ contractor status.
Background
In April 2000, HMRC introduced the Intermediaries Legislation also known as IR35, as a way of combating abuse by individuals and companies of the individuals’ contractor status and thus avoiding paying Tax and NIC.
The legislation was targeted at pseudo employees who were providing services though their own personal Service Company (PSC) but were essentially employees of the company.
The legislation was designed to introduce a set of criteria that could establish if the worker was a ‘Friday to Monday’ employee or truly running a company.
Changes to the Rules
From 6 April 2020 there are changes to how the rules will be applied.
In addition, if you are a public sector authority, or are a medium/large sized private sector client (including some charities), then the responsibility (in much the same was as CIS deductions from subcontractors are the responsibility of contractors), lies with you to decide if the new rules apply.
Clients that need to comply with the new rules must meet 2 of the following criteria:
- you have an annual turnover of more than £10.2 million
- you have a balance sheet total of more than £5.1 million
- you have more than 50 employees
However, even if you are not a limited company but your turnover is more than £10.2M you must still apply the rules. Connected companies and subsidiaries also have to consider their status.
Client’s responsibility
Before agreeing any contract with an agency or worker, you must establish their employment status. You must inform the individual or the organisation of your conclusion and you must keep detailed records of the outcome. If you don’t inform your worker then you will be deemed as being responsible for their NI and Tax.
If you decide that off-payroll working rules apply, then you will need to deduct pay and NI and pay this to HMRC.
The rules are complex and finer detail is still under review however, we can provide assessment of your contractors as part of our payroll service and allow for NIC and Tax to be collected at source and the deductions reported to HMRC using Full Payment Submission (FPS).
If you would like more information on this please contact us:
Email: info@renumeris.com
Telephone: 01909 481020
