Due to the pandemic, IR35 regulation changes have been deferred to 6 April 2021, originally planned for implementation on 6 April 2020.
There will be an update that aligns public and private sector IR35 rules and there is just over two months until this takes effect.
What is IR35?
IR35 or “off-payroll working rules” can apply if a worker/contractor provides their services through their own limited company or another type of intermediary to the client.
The rules make sure that workers pay broadly the same tax and National Insurance contributions as employees.
Inside or Outside the rules
If you are operating “inside” the rules you must pay the same tax and NI as if you are an employee. If you are operating “outside” IR35, the legislation does not prevent you from paying tax and NI on the private contractor basis and you are able to pay yourself a salary and withdraw further income as dividends whilst your limited company only pays corporation tax on its profits.
Responsibility
The responsibility for setting IR35 status and paying the relevant tax will be that of the business paying for the work conducted. However, small businesses are relinquished of this responsibility and it will be that of the contractor working for them to set their own status.
Does this apply to you?
- Are you a contractor working through a limited company and receive benefits like sick pay and holiday pay?
- Are you managed by your client or under close supervision and work at their premises?
- Is this your only client, working exclusively for them?
- Is your contract ongoing or do you have a continuous relationship?
- Work that has been rejected is at your clients cost
If all of the above apply you will be deemed to be working “inside” IR35 and therefore tax and NI should be paid by making a ‘deemed payment’ at the end of the tax year.
- Do you work for your own company and do not receive employment benefits such as sick pay and holiday pay?
- Are you being paid on a project basis or at a fixed price?
- Do you decide when to work and can you send a substitute to do the work as and when it suits you?
- Are you able to work from your own premises and use your own equipment and tools?
- Do you work with more than one client at one time or on short successive projects with a variety of clients?
- Do you have your own insurance and branding and do you correct work at your own expense?
You will be working “outside” IR35 if you have considered the above and they apply to you. As you are outside the rules you can continue to run your limited company as normal.
Contact us now for further information and advice on IR35 ‘Off-payroll working’.
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