Everything you need to know about Off-Payroll (IR35) in the Private Sector
‘IR35’ is a real buzzword at the moment – especially if you are a contractor or freelancer – but what is it, and how will it affect you? Well, there has been a fair amount of confusion as to what these changes might mean and the ambiguous nature of HMRC’s guideline definitions do not help... So, here at Gleeson Recruitment Group, we set about finding answers to some frequently asked questions about the legislation to help you along.
What does this mean for you?
The original legislation stated that it was the contractor’s responsibility to self-assess, declare and pay the appropriate tax; however, the Finance Act 2016 announced that the responsibility would shift from the contractor to the end-hirer. These changes were launched into the Public Sector in 2017 and are predicted to be launched into the Private Sector on 6th April 2020 - if you are a contractor currently working through a Limited Company, it’s likely that your employer will be carrying out employment status assessments and revising contracts (where necessary) in preparation. This will present you with the opportunity to negotiate an ‘IR35 friendly’ contract. This may involve changing your contracted duties to fall in line with HMRC’s definition of ‘self-employed’ and ensuring that your working practices match those stated in the contract.
Who is liable?
The assessment of employment status must be carried out with “reasonable care” and it will become a legal obligation to pass that information down the contractual supply chain. A failure to pass this information on to the end-hirer could result in the interception of liability. Wherever the assessment has been made incorrectly or without reasonable care, that entity will be liable for any unpaid taxes, therefore it’s important for employers and recruiters alike to carry out the assessment thoroughly.
Below is some of the criteria used to determine whether your role is inside or outside of IR35:
1. Control: does your line manager dictate what you do and which hours you do it in?
2. Substitution: are you prohibited from sending in a substitute to complete the work in your place?
3. Mutuality of Obligation: is the organisation obliged to provide you work and are you obliged to accept it?
If the answer is no, then the chances are that you are not a disguised employee and your contractual work sits ‘outside’ of IR35. If you answered yes to one (or all) of the above criteria, then there is a chance that you are at risk of falling ‘inside’ IR35. HMRC’s online CEST tool, which has been used by public sector end-hirers to determine employment status, has been known to provide varying results. We would, therefore, advise you to take professional advice if you are unsure as to whether your current/future roles fall “inside” or “outside” of IR35.
What do I do?
We would recommend that you engage with a professional expert as soon as possible, to review your working practices and contracts, ensuring there are no discrepancies which could affect an end hirer’s decision around employment status in the future. They can also advise around favoured working practice for future roles, to ensure that the contracts reflect the true substance of the role that is being performed.
If you are a contractor or freelancer and you are uncertain as to how the IR35 legislation may affect you, contact email@example.com and we will do our best to provide you with essential information and guidance.