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.

Our team are ready and happy to help you through the ideal options for your business and put a plan in place for your payroll Solutions.

Contact our friendly, knowledgeable staff today to discuss what we can do for you.

 

2020 was a challenging year for agencies and contractors alike, and not just because of the coronavirus pandemic. Brexit and the upcoming IR35 changes have added to the sense of uncertainty that business owners faced throughout the past year, which has continued into 2021.

However, whilst it may appear we’re facing the perfect storm as we move further into 2021 in this blog, we will look into how you can overcome that uncertainty in the contractor market to ensure your business’s success this year.

Coronavirus

As businesses attempt to recover from the financial devastation of the last year, or are making plans to do so later this year, and we hopefully see restrictions eased and the national lockdown come to end, employing contractors rather than permanent hires could be the perfect solution for many businesses.

By hiring contractors, businesses can fill any gaps in their resources and knowledge and bring new skills into the mix. This may also allow them to revitalize any projects that may have been paused in 2020 due to a lack of staff or resources.

In the meantime, there any many support packages available from the government that businesses can apply for in the hope this will keep them afloat through the latest lockdown. The latest grant, a one-off payment of up to £9,000 is specifically for those in the retail, leisure and hospitality sectors. The Coronavirus Job Retention scheme, otherwise known as the furlough scheme, has also been extended until April and the 100% business rates relief measure is in place until the end of March. More information on the support available can be found here.

Brexit

As of 23:00 GMT on 31st December 2020, the UK completed its formal separation from the EU single market and customs union. The UK Government has since secured an approved trade deal, which sets out the framework for how the UK and EU will live, work, and trade together.

The full details of how the new trade deal will impact the contractor workforce is still to be disclosed. However, we know that it will impact the ability to move freely within the EU and the impact of the new rules, tariffs and regulations will hinder businesses ability to recruit EU nationals.

One of the impending changes that agencies and contractors should keep an eye on, is the changes that’ll affect right to work documentation. Employers will no longer be able to rely on an EU passport for example, as proof of an individual’s right to work within the UK. Rather, EU nationals who wish to stay living and working in the UK must apply for a new visa, to prove their Settled/Pre-Settled status. For any agencies who employ EU workers, to ensure compliance, your workers need to apply for this visa before the 30th June 2021 deadline to secure their right to continue living and working in the UK.

Contractors will still be able to work across numerous sectors throughout the EU, however, the nature of the Brexit regulations may dissuade businesses from doing so. On a more positive note, remote working has seen an influx in popularity due to the Coronavirus pandemic. And the flexibility that contractors can offer may see them relied upon more than ever as business shift to align themselves with the new rules and regulations.

More information on the trade deal and how the new regulations may affect your business can be found here.

IR35

As of April 2021, the responsibility for determining workers’ employment status will fall with the client (i.e. agency) rather than the worker themselves. This legislation change applies to all large, medium or private sector companies and agencies, and is called ‘off-payroll working’.

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 end client will be responsible for paying any additional tax due.

It possible to work ‘outside’ the scope of IR35 if you are a limited company contractor genuinely working on your own, i.e., using a contract to provide services, not “employed” by a client.

Whilst the IR35 reform has caused a lot of concern, realistically the IR35 regulations shouldn’t result in businesses pushing contractors away. On the contrary, regulations simply encourage business owners to ensure all working relationships with contractors are compliant by defining the status of the contractor against HMRC’s criteria for tax purposes.

How Can We Help?

We understand that as we enter 2021, Brexit, the continuing Coronavirus pandemic and the upcoming IR35 reforms all have the potential to cause uncertainty and with so many changes it can be overwhelming. Here at Azure Global, we are here to put your mind at rest.

Our team are ready and happy to help you through the ideal options for your business and put a plan in place for your business payroll Solution needs.

Contact our friendly, knowledgeable staff today to discuss what we can do for you.