Chancellor Rishi Sunak’s Budget announcement on March 3rd, 2021 has confirmed that there will be no further postponement to the private sector rollout of the off-payroll legislation, also known as IR35.
Although the IR35 changes have already been postponed a year, due to the COVID-19 pandemic, many businesses were calling for a further delay and were undoubtedly holding out hope for a last minute U-turn.
However, the IR35 changes are going ahead as planned and will come into effect on 6th April 2021 with many businesses having taken the delay from April 2020 as an opportunity to meet the new compliance conditions.
Although some businesses are ready, due to the speculation of a further deferral, some may not be fully prepared for the new rules and how it may impact them. We’ve prepared a last minute guide below, for all things IR35, to make sure you’re ready.
A Quick Reminder – What Is IR35?
The IR35 laws were first introduced in 2000 in an effort to identify ‘disguised employees’ within businesses. IR35 legislation ensures off-payroll and on-payroll workers are taxed fairly and accordingly. Breaking this down, this means that if a contractor is working under the exact same conditions as a contracted employee, then IR35 rules make sure that the contractor pays the same tax and national insurance contributions as their employed counterpart.
What Are The New Rules?
The change coming into play on 6th April 2021, concerns who will make the IR35 determination. At present, contractors themselves are responsible for determining their employment status, and whether or not they’re working outside IR35 rules. When the new rules come in, this responsibility will shift to the client (i.e., agency).
Agencies will be responsible for determining the employment status of their workers and whether they fall inside or outside of IR35. For example, if you are registered as self-employed, but are found to be working as an employee, the agency will be responsible for paying any additional tax due.
Who Will Be Affected By The Changes?
The legislation change applies to all medium, large or private sector businesses and agencies. Contractors in particular will be affected, including those who work in construction, IT and engineering, to name a few.
The new IR35 rules don’t, however, apply to all businesses. Currently, small business as well as sole traders and PAYE agency workers, are exempt. There are also situations where it is possible to work outside the scope of IR35, for example if you are a limited company contractor genuinely working on your own, i.e., using a contractor to provide services, not ‘employed’ by a client.
How Can We Help?
With less than three weeks to go until the IR35 changes come into effect, if you’re still feeling unsure about how these changes will impact your business and need some guidance with your payroll, we are here to help.
Our friendly, knowledgeable team are on hand ready to help talk you through the best options for you and your business.