CHANGES TO IR35 LEGISLATION AND ITS IMPACT ON CONTRACTORS By Liam O’Connell
At CK Clinical, part of the CK Group, we employ many professionals who work at our client organisations on a contract basis. Due to this we are keen to offer them the best information possible in order to keep them up to date and allow them to make informed decisions regarding the new IR35 legislation. Here is some of the information we have shared with them: What is IR35? IR35 is a set of tax laws which form part of the Finance Act. The first piece of legislation came into force in April 2000 and is properly known as the Intermediaries Legislation. IR35 takes its name from the original press release published by the then Inland Revenue (now HMRC) announcing its creation. IR35 is a set of tax rules that apply to you if you work for a company through an intermediary – which can be a limited company or “personal service company” which is how many contractors operate.
It is not mandatory for client companies to use CEST to determine the IR35 status of their contractors, but HMRC have said they will stand by the results given by CEST, unless any checks reveal that inaccurate information has been submitted. It is critical that proper and thorough assessments of each assignment are made, rather than attempting to apply a single, all-encompassing status determination to all contractors.
What’s changing, and when? In October 2018, the government confirmed that it would be extending the off-payroll rules to the private sector. As of 6 April 2020, the responsibility for IR35 assessment will shift from the intermediary (usually the contractor’s own personal services company), to the employer. The draft legislation was published on 11 July 2019.
What do contractors need to know?
The changes will also make private sector employers (or the fee-paying agency acting on their behalf) responsible for making the correct deductions for the tax and National Insurance Contribution of their contractors who are assessed to fall within IR35. This will bring the private sector IR35 legislation in line with its public sector equivalent.
The shift in responsibility for IR35 assessment means that client companies will need to ask their contractors questions in order to make accurate assessments. Contractors should therefore be prepared to provide information relating to the ownership and management of their personal service companies, including:
How is IR35 status determined for contractors?
• How many other clients the company works with
HMRC has created a tool called ‘Check Employment Status for Tax’ (CEST). Employers can answer a series of questions presented by CEST to assess their contractors’ IR35 status.
• The types of insurances held by the company • Unique Taxpayer Reference number and VAT numbers. 18
