The rules surrounding off-payroll working will change on 6th April 2020 affecting end-clients, recruitment agencies and contractors.
IR35 was introduced in 2000 to tackle the avoidance of tax and NICs where individuals supplying their services to clients via their own company, often known as a ‘personal service company’ (PSC), who, in the eyes of HMRC were considered to be ‘disguised employees’.
A brief summary of the key points for April 2020 is below:
If you’re a PSC working for a client, the end-client will be responsible for determining the IR35 status of a contract but this only applies if the end-client is a ‘medium to large’ business. If the end-client is a ‘small‘ business there is no change.
The end-client will be considered to be ‘small‘ providing it meets two or more of the following criteria, the existing rules continue and responsibility for determining the IR35 status will still remain with the contractor/PSC:
- Annual turnover is not more than £10.2 million
- Balance Sheet total is not more than £5.1 million
- No more than 50 employees
If IR35 applies, the liability to pay PAYE and NICs will become the responsibility of the ‘fee payer’ rather than the person providing the worker. The fee payer is the organisation paying the PSC for the worker’s services. The end-client and the fee payer are often the same person, but not always, for example when an intermediary such as a recruitment agency is involved in the supply chain.
The fee payer will need to deduct PAYE and NICs on the payment as if the worker was a direct employee. The fee payer is also responsible for employer NICs.
Employment status factors still apply. IR35 continues to be a complex area so professional advice should always be obtained.
If you’re looking for any help with IR35 please get in touch!