OFF-PAYROLL (IR35) REFORMS UPDATE
Jan 15, 2020
Earlier this month the Chancellor Sajid Javid announced there would be a review of the planned off-payroll (IR35) reforms which are due to come into effect in April this year.
Whilst many were expecting Mr Javid to say that the detail of the reforms to be looked at, this was in fact not the case. Instead what is proposed is a review of the way in which the reforms will be implemented. As a result, it looks likely that the reforms will go ahead and contractors, employment agencies and end hirers need to be prepared.
A reminder of what’s happening
At the moment, contractors are responsible for determining their own IR35 status and paying the correct taxes. If they get it wrong, they are liable for unpaid taxes and penalties.
From April, responsibility for IR35 assessment will rest with end hirers. Employment agencies will be liable for incorrect tax payments in the first instance, with responsibility moving up to end hirers, should HMRC successfully challenge the assessment decision.
Who’s affected
The reforms will affect contractors who are working or planning to work via their own limited companies.
What are the options?
If an end hirer makes an ‘outside IR35’ status determination, a contractor would be able to continue to operate through their own limited company though they may be required to undergo re-assessment at regular intervals to check their role remains ‘outside IR35’. If an ‘inside’ IR35 decision is made, the contractor may be able to work through their limited company but will more likely be required to look at an alternative solution such as Umbrella employment.
What is an Umbrella company?
An Umbrella company acts as your employer whilst enabling you to continue to enjoy the freedom of being a contractor. As an employee of the Umbrella, you pay tax and National Insurance, just like a regular employee, so your take-home pay is lower than if you operated through your own limited company. However, Umbrella contracting does give you employment rights and benefits such as holiday pay, sick pay, access to a company pension and a record of continuous employment.
Are you affected by the off-payroll reforms?
It’s important that you understand how the reforms will impact you. If you haven’t yet got clarity from your employment agency or end hirer, you should begin the conversation soon so that you have time to get prepared. If you would like more information about the reforms, please get in touch, we will be pleased to answer any questions you may have.
Switching to our Umbrella
If you expect to have to switch, then our FCSA-accredited Umbrella service is one of the best in the marketplace. Not only do we offer first-class service to ensure you receive your payments on time, with all tax and compliance issues taken care of your behalf, we also provide comprehensive insurance to cover personal accident (including your commute), professional indemnity and public liability. This insurance is all part of our Umbrella service, so there are no extra charges.
Registration is simple. To find out more, please view our Guide to Umbrella Contracting or get in touch to speak to a member of our team.