With a change in IR35 rules in April 2020, we take a look at how this legislation might affect you.
IR35 affects all contractors who do not meet HMRC’s definition of self-employment and those caught by the legislation will be subject to tax as an employee.
How Are The Rules Changing?
Off-payroll working rules changed on 6 April 2020 and are applied differently.
From this date, medium and large sized clients will be responsible for deciding the employment status of workers.
For all public authorities the rules will continue to apply as before.
Who The Rules Apply To
The rules apply to all public sector clients and private sector companies that meet 2 or more of the following conditions:
you have an annual turnover of more than £10.2 million
you have a balance sheet total of more than £5.1 million
you have more than 50 employees
Balance sheet total means the total amounts shown as assets in the company’s balance sheet before deducting any liabilities.
This is in line with the small companies’ regime.
How Does This Affect You?
The client is now required to check the employment status of a contractor and is responsible for ensuring that the correct application of the off-payroll working rules, if you are providing services via an intermediary.
The client will need to decide the employment status of a worker and for every contract agreed with an agency or worker.
They will also need to:
pass determination and the reasons for the determination to the worker and the person or organisation being contracted
ensure they keep detailed records of their employment status determinations, including the reasons for the determination and fees paid
have processes in place to deal with any disagreements that arise from the determination
If they are also the fee-payer and the off-payroll working rules apply, they will need to deduct and pay tax and National Insurance contributions to HMRC.
What To Do If The Client And The Worker Disagrees?
A worker or the agency paying the worker’s intermediary may disagree with the employment status determination you reached.
If this happens you will need to:
consider the reasons for disagreeing given to you by the worker or agency paying their intermediary
decide whether to maintain the determination if you feel it is correct and give reasons why – or provide a new the determination because you feel it was wrong
keep a record of your determinations and the reasons for them, as well as records of representations made to you
You must provide a response within 45 days of receiving notification that the worker or agency disagrees with your employment status determination.
During this time you should continue to apply the rules in line with your original determination.
Tell the worker if the determination has not changed.
Tell the fee-payer and the worker if the determination has changed.
Failure to respond within 45 days will result in the worker’s tax and National Insurance contributions becoming your responsibility.
