IR35 Assist

Overview
Solution
FAQ

From 6 April 2020, medium and large private sector businesses will be responsible for determining the correct tax treatment on payments they make to individuals via intermediaries.

IR35 is HMRC’s tax avoidance legislation which governs the payments an individual receives when providing their services to an “end client” through an intermediary (e.g. a personal service company and/or agencies). The legislation applies to the individual workers, and the businesses hiring them, who are supplying their services via an intermediary, but who would be an employee if the intermediary was not used.

Through our end-to-end change management solution IR35 Assist, we can provide you with the knowledge, know-how and expertise needed to work safely within the new legislation.

What is IR35?

IR35 is HMRC’s set of rules for governing the tax due on payments that individuals receive for providing services through intermediaries. The rules were introduced in 2000 to ensure that individuals providing services through intermediaries pay broadly the same tax as employees providing the same or similar services.

How will IR35 affect my business?

From 6 April 2020, medium and large private sector businesses will be responsible for determining the correct tax treatment on payments they make to individuals via intermediaries.

Tailored IR35 toolkit designed for your business

IR35 Assist is an end to end change management solution designed to provide businesses with the knowledge, know-how and expertise needed to work safely within the new legislation. IR35 Assist helps to eradicate the financial, legal, operation and reputational risks of misunderstanding your obligations under the new rules.

IR35 is HMRC’s tax avoidance legislation which governs the payments an individual receives when providing their services to an “end client” through an intermediary (e.g. a personal service company and/or agencies). The legislation applies to the individual workers, and the businesses hiring them, who are supplying their services via an intermediary, but who would be an employee if the intermediary was not used.

What is IR35?

Also known as the “off payroll working rules”, or the “intermediaries legislation”, IR35 is HMRC’s tax avoidance legislation which governs the payments an individual receives when supplying their services to an “end client” through an intermediary (e.g. a personal service company and/or agencies). The legislation applies to the individual workers, and the businesses hiring them, who are supplying their services via an intermediary, but who would be deemed to have “employee status” for tax purposes if the intermediary was not used. In such circumstances, the same tax and national insurance contributions will need to be accounted for by the “end client” when paying for the services provided.

Pre-IR35, the intermediary has the primary responsibility for making sure appropriate tax and NICs are accounted for with HMRC, in respect of their individual workers supplying the services. Following the implementation of IR35, due on 6 April 2020, this responsibility will shift to the “end client”

Is IR35 new?

No, IR35 legislation was introduced in 2000 and was implemented for the public sector in 2017.

What is changing?

From 6 April 2020, the “end client”, or employment agency, will have responsibility for determining whether or not, but for an intermediary, an individual worker engaged via an intermediary would have deemed “employment status” and, as such, what tax and NIC payments should be made in respect of payments for the services. Moreover, if the end client determines that the individual worker would have deemed employment status for tax purposes (i.e. is “within IR35”), and the end client is also the fee payer (i.e. the party that pays the intermediary), it will be responsible for making PAYE deductions from payments it makes in respect of the services.

Who is affected by the changes?

The 6 April 2020 changes will affect medium and large businesses in the private sector. A medium or large business is one that isn’t a small business. For example, you must satisfy at least 2 of the following:

  • Annual turnover of more than £10.2 million
  • Balance sheet more than £5.1 million
  • More than 50 employees

Small businesses are not affected by the April IR35 changes, however it is recommended that they also assess their arrangements with contractors from an employment law perspective.

Will the changes affect existing arrangements?

Yes. Businesses who engage contractors or self-employed individuals, via a limited company or agency, will be obliged to:

  • Assess if that individual worker supplying the services would have deemed “employment status” for tax purposes, if not for the intermediary.
  • Make the appropriate PAYE deductions from the services costs if the individual worker is deemed to have “employee status” OR reassess the nature of the engagement to mitigate such liabilities.
  • Provide a Status Determination Statement to all intermediaries and individual workers confirming their assessment as to whether IR35 applies or not.

If the individual worker is deemed to have “employee status” but for the intermediary, they will fall within scope of IR35.

I’m a medium or large business, what do I do next?

Step 1 – Establish whether any individuals providing services as contractors do so via an intermediary. If they do, you need to find out whether the individual has a “material interest” in that intermediary (for example, having a 5% shareholding/voting rights).

Step 2 – If the individual has a material interest in the intermediary, you need to determine, but for the existence of the intermediary, would the individual have deemed employment status for tax purposes. Our IR35 Assessment Tool can help you with this!

Step 3 – Communicate your assessment (step 2) to the individual worker and the intermediary via a Status Determination Status. Within this document you should explain the basis upon which the arrangement is deemed to fall within IR35 or not. We provide template Status Determination Status documents and support clients with preparing their content if you need assistance!

Step 4 – Manage any disputes – Our dispute resolution team can assist.

Step 5 – Make the appropriate tax and NIC deductions as required, if IR35 applies. OR, reassess your existing engagements and realign your contractual arrangements so that IR35 does not apply. We can assist you with this assessment and any future consultancy contracts needed.

What is Acuity’s IR35 Assessment Tool?

Our IR35 Assessment Tool allows businesses to determine if their engagements with self-employed individuals (via an intermediary or not) will fall within or outside IR35. It also provides guidance on the potential exposure of employment and/or worker status claims in the Employment Tribunal, and how best to mitigate such risks.


Claire Knowles

Head of Department

+44 (0)7896 671 817
[email protected]

Rebecca Mahon

Solicitor

+44 (0)7772 331 455
[email protected]