Are you prepared for the changes to IR35?

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Changes to the off-payroll working rules (IR35) will come into force from April 6, 2020.

IR35 rules apply for workers who provide a service to a business, but aren’t actually employed by that business, for example directors of contractor-style limited companies.

Providing services through an intermediary, the worker will have his/her own personal service company / business. 

The IR35 rules ensure that the worker providing a service through an intermediary such as a limited company pays ‘broadly’ the same tax and National Insurance contributions as they would if they were employed.

Under the current rules, if the worker is carrying out work through an intermediary for a customer in the private sector, it is down to the worker to decide their own status.

However, from April the rules are going to change.

All medium and large-sized private sector businesses will be responsible for deciding on a workers status.

However if a worker is carrying out work through an intermediary for a small customer in the private sector, the worker will remain responsible for his/her own status.

It is crucial that employers, employees and the self-employed are prepared for these changes.

HMRC is offering the following advice:

  • Identify individuals who are supplying their services through personal service companies in your current workforce (including those engaged through agencies and other intermediaries).
  • Determine whether the off-payroll rules apply for any contracts that extend beyond April 2020.
  • Talk to your contractors to see if the off-payroll rules apply to their role.
  • Put processes in place to determine if the off-payroll rules apply to future engagements. These might include who in your organisation should make a determination and how payments will be made to contractors within the off-payroll rules.

Further information can be found on HMRC’s website here, or contact Nick Charnley, tax manager at Ellis & Co on 01244 343504.