From April 2020 there will be major changes to the off-payroll working rules otherwise known as IR35. These changes will bring the private sector into alignment with the introduction of similar rules to the public sector in 2017.
The reforms will have far-reaching impacts to both clients and contractors alike. Now is the time to plan and prepare for what these changes mean to you.
As one of the UK’s leading workforce management companies and having in-depth experience of the introduction of these IR35 rules to the public sector we are well-placed to help you navigate these important changes.
This page brings together information for clients and contractors. You may have other questions, please do get in touch.
What is happening?
From 6 April 2020, the responsibility for applying the off-payroll rules will move from the contractor to the ‘end-user’. And, where an individual is ‘inside’ the rules, it will be the responsibility of the ‘fee payer’ to make the appropriate deductions as required by HMRC, such as income tax, employer and employee NIC and the apprenticeship levy.
It is important everyone educates themselves as to what these changes mean and how they impact you.
There are many things that clients could be doing, but the following are some of the minimum steps that should be taken.
- Set up a working group: Pull together the right stakeholders within your organisation who may have an interest in the new IR35 rules – HR, legal, tax, payroll, IT and recruitment partners. Who needs to know about this and what do they need to do in order to support it?
- Identify who is at risk: You need to understand the extent of the issue you are facing. How many contractors are in scope? How do you track who and where they are? How critical are they to your operation?
- Review your systems: Are your IT and payroll systems up-to-speed and able to cope with the change? What controls do you put in place to make a determination about their status?
- Seek advice: It is so important to understand the rules. Work with your advisers and recruitment partners to be better informed.
- Review employment models and policies: Understand the different models you could use. Is it about moving contractors to PAYE, using Statements of Work or an Employed Consultant (EC) model? What will be your strategy to hold onto key talent? Will you have specific policies that govern the use of contractors in your organisation?
- Communicate: Make sure you engage your internal audiences as well as the contractors. More people will become aware of the pending changes over the coming months and they will all have questions.
What support can ManpowerGroup offer?
We have a number of client events taking place over the upcoming months in which we hear from IR35 specialists and share best practice. To find out more please contact your ManpowerGroup representative or contact our dedicated IR35 team.
Are you aware of any specific tools to determine contractor status?
HMRC has developed CEST to assist in deciding whether a role is inside or outside the IR35 rules. There are also a number of third-party tools and services available.
Is my company exempt from the reform?
Small companies as defined by the Companies Act will be exempt from the changes. This does not mean IR35 does not apply, but that the responsibilities around the legislation sit with the contractor.
Further information can be found at gov.uk.
One of the key changes is that the responsibility of defining the IR35 status will switch from the contractor to the end client.
For now, contractors should consider whether your role could be seen as being within the scope of IR35 and you should be considered by HMRC as an employee for tax purposes and that you are meeting the regulations. HMRC has developed CEST to assist.
By 6 April 2020 you will receive notification from the end-client about whether your role is inside or outside the IR35 rules. As appropriate the fee payer will be making deductions and payments to HMRC on your behalf.
If you’re not already familiar with the rules and changes, please visit the HMRC website to find out more.
How does it work if I subcontract for two different companies?
Each role will need assessing on their own merit and may be that one role is deemed outside of scope and another role determined ‘in scope’.
How will IR35 effect my tax payments and wages?
If deemed within scope and you wish to continue to be engaged via your limited company then the rate will be subject to both tax and all NI deductions by the fee payer. Please speak to your accountant/adviser and they will be able to better advise you on the potential financial consequences.
What happens if I do not agree with the outcome of my status determination?
You can appeal your status to the end-user who must review and reply to you within 45 days.
Do you want the hear more?
The Manpower Team are available to assist you with further information.