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.

Contact us today to discuss your payroll solutions and what we can do for you.

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Do you have any Limited Company Contractors?

If the answer is yes, then you need to be aware of the changes to the IR35 legislation being implemented on 6 April 2021 that will affect you and your Limited workers as they may no longer be able to be paid through their Limited Company.

What is IR35?

IR35 is a piece of tax legislation which has been around since 2000. It determines whether or not a worker is a disguised employee working through a PSC, or a genuine self-employed contractor.

What does IR35 do?

IR35 looks at the differences between an employee and a contractor. For example:-

  • Do they work differently?
  • Are the providing a service?
  • Are they under supervision, direction and control?
  • Are they advised when to start and finish work?
  • Are they advised which days to work?

IR35 determines if a contractor works inside IR35, like an employee, or outside IR35, like a contractor.

If the contractor is inside IR35, they will have to be paid Umbrella PAYE or PAYE and will no longer be viable to be paid through their Limited Company.

If the contractor is outside IR35, then they can continue to be paid via their Limited Company.

To help determine whether the contractors are inside or outside IR35 then the process below should be followed:-

  • Firstly, the end client must give their opinion on whether the role is inside or outside IR35. If the client refuses to do this, then they are potentially liable for any unpaid taxes.
  • If the end client determines the role to be inside IR35, then the contractors can not be paid through their own Limited Company and will have to be paid Umbrella PAYE or PAYE. If the agency chooses to ignore this status determination, then they will be held liable for any unpaid tax. This could be up to 15% of the Contractor’s weekly wage.
  • If the role is outside IR35, then it would be advisable for the Agency to engage with a third party specialist to carry out a status determination of the contractor and their role. Red Ark has partnered with Kingsbridge who can help you with these status determinations. Get in touch today if you would like us to make an introduction to them. To find out more about how they can help, click on the link below.

What are the benefits of transferring to Umbrella PAYE or PAYE through Red Ark?

If the contractors who are currently paid through their own Limited Company have to be transferred over to Umbrella PAYE or PAYE then there are a number of benefits for the contractors going down this route. These benefits include:-

  • Dragon Perks – We have teamed up with around 4000 businesses to offer the contractors discounts and free services. They will receive discounts on food shopping, fuel, clothes shopping etc..  Contractors will also get free virtual gym sessions, free eye tests and free credit rating.
  • There is no admin for contractors. No end of year accounts, and therefore no need for an Accountant. 
  • The contractors don’t have to pay extra for insurances. If they are paid through Umbrella then the contractor will be covered by our insurances.

If you wish to discuss any of the above in more detail, please do not hesitate to get in touch.

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