Will IR35 reforms affect my business?
Not all businesses that engage contractors or freelancers will be affected. The legislation changes will not apply to small companies with a turnover of less than £10.2m, a balance sheet of less than £5.1m or less than 50 employees. The legislation will affect all businesses that fall outside these criteria.
How long do I have to become IR35 compliant?
IR35 reforms for the private sector are due to be implemented in April 2021, and we recommend preparing well in advance, by assessing the IR35 status of all contract roles you currently engage workers for, and any that you plan to engage workers for in the near future.
Is there a legal definition of an “employee” or an “independent contractor”?
Case law is used to decide whether an individual supplying their services to a company is classed as an employee or is a self-employed contractor. Generally, HMRC will look at both the contracts between the parties and the working practices (the way the work is performed in reality).
What factors might suggest an assignment falls inside IR35?
If the following statements sound like they apply to the role, it’s likely to fall inside IR35: A substitute can be provided by the end client; the worker performs a set amount of hours per day/week; the worker is subject to the end client’s direction or supervision; the worker receives overtime pay or a bonus.
What factors might suggest an assignment falls outside IR35?
If these statements sound like they apply to the role, it's likely to fall outside IR35: The worker can hire someone else to do the work, or engage helpers at their own expense; the worker provides the equipment they need to do the job; the worker can decide how and when to provide the services; the worker regularly works for a number of different clients.
Who is liable for an incorrect IR35 determination?
Historically is has been the worker/their limited company that is liable for an incorrect determination, but when the reforms come into play the fee payer/end client holds liability.
What are the risks if IR35 isn't handled correctly?
Failure to comply with the guidelines could see your company face fines of over 50% on top of the contractor's pay, and puts your company in the firing line for litigation with HMRC; fines can also be backdated up to 4 years from when the legislation comes into play. You may also risk delays to your projects due to lack of resources, and reputational damage which may restrict your flow of off-payroll talent in the future.
How can SEC help?
We've done this before; our compliance team has extensive knowledge supporting public sector organisations through these changes in 2017. We take compliance seriously, and we're consistently recognised as the most compliant recruitment partner in our client audits. We've also partnered with Qdos to provide a digital IR35 determination service for our clients and candidates - get in touch to understand more.