We’ve all heard of IR35, but do you know the rule changes that are being
introduced? IR35 also known as the ‘off-payroll’ working rules and will kick in
if a worker provides their services through an intermediary. It’s been in the news for some time now
affecting a lot of News and TV presenters and has been making big
headlines. From April 2020 this will
now be affecting the private sector from any industry where they are working
either through a limited company or as a sole trader but the relationship
between themselves and the client could constitute an employer/employee relationship.
An intermediary will usually be the worker’s own personal service
company, such as a limited company. They could also be a partnership, a managed
service company, or an individual who is on self-assessment.
The rules make sure that workers, who would have been an employee if
they were providing their services directly to the client, pay broadly the same
tax and National Insurance contributions as employees.
The rules apply if a worker provides their services to a client through
an intermediary but would be classed as an employee if they were contracted
directly.
So, who decides?
If you’re a worker and your client is in the public sector like a school
or library, it’s their responsibility to decide your employment status. You
should be told of their decision; we’ve seen a large number of the larger
companies starting to make changes to their arrangements with their
subcontractors in preparation for this event. This will affect everyone, including
people who employ a Cleaner, a subcontractor in the building industry. IR35 supersedes the CIS scheme i.e. its take
priority over the CIS scheme above everything.
If you are a worker and your client is in the private sector, it’s your
intermediary’s responsibility to decide your own employment status for each
contract. The private sector includes third sector organisations, such as some
charities.
HMRC do have a calculator on their website to help you see for yourself
whether you would have to comply with the rules.
There are tests that are run to decide this for you.
https://www.gov.uk/guidance/check-employment-status-for-tax
Some of the tests are as follows
Who has the control, can you say no to projects or specific pieces of
work, or are you required to take whatever work is given to you.
Do you use your own tools at work?
Do you have public liability insurance and employers liability insurance?
Can you send in a substitute for yourself? Not a main point but it does get weighted on
any HMRC decision.
The difference on what this will mean for you, is that you will no
longer be able to claim the travel expenses you would have been able to claim
before regardless of the distance you are travelling to work, plus you will pay
the higher national insurance which currently is 12% for employees and 13.8%
for employers. You effectively could pay out both rates,
not just the one.
HMRC do not care if you have given up your employment rights, i.e.
holiday pay and sick pay. We are
expecting them to spot check individuals at any point during 2020.
The costs to the private sector will be very high, we haven’t seen the
updated budget expected to be out in March 2020. But are expecting with all the news coverage
and the actions the larger companies are planning, everyone could be affected imminently.
If you are facing this problem with your own subcontractors, please get
in touch with us, we have a risk assessment template for our clients that they
can use. If you are a subcontractor yourself,
it is worth getting in touch with your contractor to find out their plans for
the system.
A lot of these companies are planning on putting everyone on PAYE
whether you receive the employment rights that go with that change, we are
still waiting to see.
