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.