We know IR35 can be tricky, so we’ve compiled a list of all of the question we get asked on a daily basis.
What is actually happening in April 2021?
HMRC want to ensure everyone is paying the correct tax. They are cutting down on people operating as a Limited Company, when they are more like an employee of the end client. Your end client will conduct tests (Control, Substitution and Mutuality of Obligation) to see if you are truly self-employed, or an employee of their company. If you are deemed to be more like an employee, you have two choices a) be paid via PAYE basis or b) continue to operate through your Limited Company and your agency will deduct the necessary NIC’s and income Tax before paying you the net amount.
How will this affect me?
The responsibility of determining your employment status will now sit with the end client, rather than yourself or your agency. If you are deemed inside IR35, you may be paid on a PAYE basis using an Umbrella Company, or continue to be paid via your Limited Company and have NIC’s and Income Tax deducted from your gross, before your agency pays the net amount to you.
Can I still use my Limited Company?
This is dependent on your end client and agency. If they are willing to pay your company, having taken into account the deductions needed, you should be able to operate through your Limited Company. However, if they do not take this responsibility on, they will either propose in-house PAYE, or pay you through an Umbrella Company.
Will I need to close down my Limited Company?
This is dependent on your end client and agency. If they are willing to pay your company, having taken into account the deductions needed, you should be able to operate through your Limited Company. However, if they do not take this responsibility on, they will either propose in-house PAYE, or pay you through an Umbrella Company.
I don’t want to go Umbrella!
The end client will conduct tests to determine your employment status and the final decision is up to them. You can of course choose whether to be paid by PAYE or Umbrella PAYE, and there’s always the option look for work elsewhere.
How will this affect me?
HMRC want to ensure everyone is paying the correct tax. They are cutting down on people operating as a Limited Company, when they are more like an employee of the end client. Your end client will conduct tests (Control, Substitution and Mutuality of Obligation) to see if you are truly self-employed, or an employee of their company. If you are deemed to be more like an employee, you have two choices a) be paid via PAYE basis or b) continue to operate through your Limited Company and your agency will deduct the necessary NIC’s and Income Tax before paying you the net amount.
What’s is an Umbrella Company?
Umbrella Companies are outsourced employment payroll. We take away all of the admin burden and responsibility that comes with payroll, whilst ensuring that we keep you fully compliant with HMRC regulations. You’ll be treated as a fully-fledged employee, giving you all of the same rights, including such as statutory pay, pension contributions and insurances for your temporary assignments. We’ll also take care of your Tax’s and National Insurances.
My accountant hasn’t told me about any changes!
The majority of accountants will be aware of the changes. However, your agency will have more information about your employment status, as your accountant will no longer have any say.
Will my hourly/daily rate be affected by the changes in April?
Yes - being paid by your Limited Company would only pay for your Income Tax and National Insurance. If you’re now being paid PAYE or Umbrella, you’ll now also be contributing to the Employers National Insurance and have holiday pay paid per each hour you work. Unfortunately, this means you may see less take home pay as your Limited Company pay is usually inclusive of these uplifts.
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.
I have just signed my Limited Company on a 6 month contract, do I need to be worried after April?
Not necessarily! If you are deemed inside IR35, you can still operate through your Limited Company, but the Fee-payer will most likely pay you a net payment amount after the correct NIC’s and Income Tax have been deducted, as opposed to the gross amount.
Have another question? Contact our team. We’d love to help you!
