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What is IR35?
IR35 was introduced in 2000 to address concerns relating to individuals who supply their services via an intermediary (such as a Ltd Company) instead of as an employee, and therefore avoid paying employee income tax and national insurance contributions.
Where an assignment is deemed ‘inside’ IR35, PAYE deductions must be made from the contractor's pay.
Any assignment ‘outside' IR35 is classed as a genuine B2B service and is therefore not subject to the same tax treatment as employees.
Watch our video about IR35 for a deeper explanation.
So, what is changing?
From April 2020, following changes in the public sector in 2017, the government will be extending reform to the legislation to capture large parts of the private sector.
The key change is that the responsibility of defining the IR35 status of the assignment will switch from the individual’s Ltd company to the client, as the recipient of the services.
What do companies need to do about it?
The requirement of the legislation states that all companies must take ‘reasonable care’ when assessing if roles are inside or outside of IR35. Taking a ‘blanket approach’ to assess all roles won’t deliver this.
The potential financial penalties can be significant if incorrect steps are implemented, but there is time and support available to help. We have urged our clients to take a calm approach, but also suggested they think about these changes and to act now. Or contact us today for more help.
We have suggested a timeline to support your approach below:
Companies should start capturing a full picture of their non-permanent workforce
Look at which solutions you can deploy to make yourself ready
Start implementing your chosen solution. There are a number available and we recommend a tailored approach.
With a solution in place you will be protected against the upcoming legislation. Set up processes to monitor ongoing compliance.