We know IR35 can be tricky, so we’ve compiled a list of all of the question’s recruiters ask us on a daily basis.
What is actually happening in April 2021?
The responsibility of determining whether your contractor’s employment status will fall to the end client. In addition, the Fee-payer (usually the organisation paying into the Limited Company) will need to make correct deductions of NIC’s and Income Tax to HMRC.
How will this affect me?
As the agency, you’re responsible for deducting Income Tax and National Insurance from any amounts payable into your contractor’s Limited Company and paying it to HMRC. Where HMRC does not receive the tax due, the government proposes to pass the liability onto the party who have failed to enforce the new ruling. For example: if the end client deems your contractor inside IR35 (and therefore an employee) and your agency continues to pay into their Limited Company without the necessary deductions, the liability will fall onto you. Additionally, if you fail to inform your contractor of their employment status, as determined by the end client, your agency would be liable for any Income Tax and NIC’s due.
How will this affect my margins?
It may affect your costs when it comes to your clients. With Limited Company contractors, you are not paying for additional costs like Employers National Insurance or Apprenticeship levy. This may mean that the margin you make for your Limited Company contractor is at risk.
What advice should I give to my clients?
Your client must understand the signiﬁcance of accurately deciding your contractor’s employment status, and the consequences should this decision be wrong. The client can be liable for any unpaid Income Tax and National Insurances should the contractor be deemed an employee of the client, as opposed to a Limited Company. Optimum Pay Group can offer independent IR35 assessments, as well as offer legal advice, but the ﬁnal decision lies with your client.
Can my client put a blanket approach to everyone on site?
Absolutely. It can be difﬁcult for end clients to make an accurate determination of a contractors IR35 status, as the complex rulings rely on in-depth knowledge of case law, individual contracts and working practices. Therefore, in cases of doubt a blanket approach may be applied.
Will my contractors need to close down their Limited Companies?
No. If your contractor is deemed to be inside of IR35, they can still be paid via their Limited Company. However, the Fee-payer (usually an agency) must make sure to deduct the necessary NIC’s and Income Tax before paying the net to the Limited Company.
Do I need to be worried after April if I have agreed a long contract via my contractor’s Limited Company?
If your contractor is deemed inside IR35 they can still operate through their Limited Company, but the Intermediary or Fee-payer (most likely the organisation paying into the Limited Company in this case), will be responsible for deducting the correct NIC’s and Income Tax before paying the net amount.
My contractors have done an IR35 test and are deemed outside of IR35!
Unfortunately, the decision now sits with the end client. If your contractor is suspected to be inside IR35 when they have claimed to be outside IR35, they must be prepared to be investigated by HMRC. Most likely the end client will issue an IR35 test to your contractors and contracts will be reviewed.
What happens to contractors working in the private sector via a limited company?
If they are suspected to be inside IR35 when they have claimed they are outside of IR35, they must be prepared to be investigated by HMRC. This investigation can be backdated by up to six years, and any owed tax from that period will be claimed by the government. For this reason, we suggest that you or your contractors take our independent assessment from one of our IR35 specialists.
How do Umbrella Companies work?
Umbrella Companies are outsourced employment payroll. We offer HMRC compliant payroll services that take away the admin burdens and responsibility that comes with payroll.
Have another question? Contact our team. We’d love to help you!