With the upcoming reforms to the IR35 legislation, we continue to work with our clients on keeping their contractors engaged to minimise any disruption to their business. Here we address the most frequently asked questions we have heard in our conversations.At Allegis Group, we are working closely with IR35 specialists, HMRC experts, and key industry experts to be able to provide our customers with the most relevant and up-to-date information about the reforms as it becomes available.
The following information is intended for general information and guidance only. Anyone requiring specific or detailed legal advice should seek the expertise of an independent lawyer who is an IR35 specialist.
To increase compliance with the existing off-payroll working rules, medium and large organisations in the private sector and all size organsiations in the public sector will become responsible for assessing the employment status of individuals who work for them through their own limited company. The reform does not introduce a new tax or apply to the self-employed, who are outside the scope of the existing rules.
What the draft legislation confirms:
From April 2020, private sector clients will be responsible for assessing whether contractors are self-employed by applying the IR35 criteria. This shifts the responsibility and risk, which has been that of the contractor, onto the end-client. The change in legislation excludes engagements with small companies, where contractors will continue to determine their own IR35 status.
This means that for medium and large-sized businesses, end-user clients will be responsible for making IR35 determinations (determining whether or not a role falls 'inside' or 'outside' IR35) for our contractors.
What has changed or been expanded:
1. End-clients must pass their determination to the contractor and not just the supplier they have the contract with. Contractors will have the right to challenge determinations with which they do not agree.2. All parties in the chain must take responsibility for ensuring:
As Temporary Agency Workers are subject to PAYE deductions (income tax and employee NIC) which are higher than the effective tax rates under the PSC structure, to attract and retain Talent there may be a need to increase the amount you are willing to pay contractors. Please speak with your Allegis Group representative who can provide you with further information around the pricing implications of IR35.
IR35 applies to all contracting positions, it is not for an umbrella company to confirm whether a contractor is inside or outside of IR35 – this rests with the end-client. Any claims to the contrary should be scrutinised. Contractors engaged as Employees via an Umbrella company should already be subject to PAYE deductions therefore nothing would need to change.
Working under a “services agreement” alone does not automatically exempt a contractor from IR35 as it depends on the facts of each case and whether the role they work in is deemed inside or outside.
The ultimate decision for declaring IR35 status on a job spec sits with our clients, however we would expect that at least an initial assessment will be made and set out in the job spec. In limited situations, this may be subject to change.
This varies greatly dependent on the size of each client and their reliance on the contractor market. Most of our clients are still in the discussion and planning phase and trying to determine the best solution for their business. This tends to mean the creation of a Steerco committee, consulting IR35 experts and putting together a short- and long-term plan on how they intend to tackle these changes.
Allegis Group provide project based and outsourced services through tailored solutions and rapidly mobilised, high-performing teams.
For further information and to find out how we can help you in your individual situation, please contact your Allegis Group representative