What is IR35?
IR35 legislation stops so-called “disguised employees” avoiding tax by working through an intermediary, like their own limited company. Contractors who are “inside” IR35 pay roughly the same tax as employees.
What changed in April 2021?
Before April 2021, private-sector contractors were responsible for determining their own IR35 statusThis responsibility has now been passed to the end client, unless they class as a small private company. The legislation itself did not change, and there are still plenty of opportunities for contractors to work outside IR35.
How does this affect your contractors?
Where the client finds the contractor to be outside IR35, you can continue to make gross payments to the contractor’s limited company, and you and the client have no involvement in their tax affairs.
Where the contractor is found to be inside IR35, PAYE tax and NICs, must be paid and as a result they can expect a decrease in their take-home pay. Umbrella employment is usually the best solution in this circumstance.
How does this affect your clients?
Your clients need to determine the IR35 status of every contractor they engage. Blanket decisions can unnecessarily increase costs, so individual assessments are a better strategy. Most clients will need expert help to set up the necessary systems and processes.
How does this affect you?
Your clients and contractors will naturally look to you for advice, and it’s important that you can answer their questions and advise them correctly. You may need to arrange training to ensure this.