Much to the dismay of many agencies and contractors, Chancellor Rishi Sunak failed to mention anything regarding IR35 in the 2021 Budget announcement on Wednesday 3rd March. Although the new IR35 rules were initially due to come into play in April 2020, they were inevitably delayed due to the COVID-19 pandemic.
We understand that many businesses may have expected a further delay to be announced in the Budget and as such, may be ill-prepared for the new rules on IR35 that will roll out on 6th April 2021.
With less than three weeks to go, we’ve pulled together a last-minute guide to make sure that you’re as prepared as possible for the looming IR35 changes, and the impact they may have on your business.
A quick reminder – what is IR35?
The IR35 laws were first introduced in 2000 in an effort to identify ‘disguised employees’ within businesses. IR35 legislation ensures off-payroll and on-payroll workers are taxed fairly and accordingly. Breaking this down, this means that if a contractor is working under the exact same conditions as a contracted employee, then IR35 rules make sure that the contractor pays the same tax and national insurance contributions as their employed counterpart.
What are the new rules?
The change on 6th April 2021 concerns who will make the IR35 determination. At present, contractors themselves are responsible for determining their employment status, and whether or not they’re working outside IR35 rules. When the new rules come in, this responsibility will shift to the client (i.e., agency).
Agencies will be responsible for determining the employment status of their workers and whether they fall inside or outside of IR35. For example, if you are registered as self-employed, but are found to be working as an employee, the agency will be responsible for paying any additional tax due.
Who will be affected by the changes?
The legislation change applies to all medium, large or private sector businesses and agencies. Contractors, in particular, will be affected, including those who work in construction, IT and engineering, to name a few.
The new IR35 rules don’t, however, apply to all businesses. Currently, small business as well as sole traders and PAYE agency workers, are exempt. There are also situations where it is possible to work outside the scope of IR35, for example, if you are a limited company contractor genuinely working on your own, i.e., using a contractor to provide services, not ‘employed’ by a client.
How Can We Help?
With the deadline fast approaching, please do get in touch if you have any concerns regarding the changes to IR35 and how it may impact your business.
Contact our friendly, knowledgeable staff today to discuss what we can do for you.