IR35 Accountants

IR35

The government has confirmed plans to make changes to off-payroll working (IR35) rules effective from 6th April 2020 for the private sector. This will impact any contractors working through a personal service company (PSC), recruitment agencies and all medium and large-sized end clients.

What do the IR35 changes mean?

IR35 changes means that the end client is now responsible for determining whether a contract is inside or outside of IR35. This differs from current legislation which puts responsibility on the personal service company. The legislation also allows HMRC to recover tax liabilities from the end client, so as you can imagine this financial risk is causing a shift in how medium and large businesses use contractors.

I am a contractor operating through a personal service company, what does IR35 mean for me?

The end- client (most likely the company you are working for), must confirm the IR35 status of a contract by providing a ‘Status Determination Statement’ (SDS). The SDS must be provided in writing to the PSC worker and if an agency is involved in the labour supply chain, a copy must be provided to the agency responsible for paying the PSC.

The contract is determined outside of IR35, what now?

If an assignment is outside IR35 then employment taxes are not required to be paid, your PSC should receive the payment gross from the end-client or agency, and your company will account for these in your Corporation Tax return – with any personal tax paid through your company payroll or your annual Self-Assessment as usual.

The contract is determined as inside IR35, how will this impact me?

Unfortunately, there is no blanket answer. It depends on a number of factors including whether or not you have contracts in both categories, different revenue streams in your company, potential for growth and much more.

How can I check the likelihood of the contract falling in or outside IR35?

HMRC have developed a tool CEST (Check Employment Status Tool) that will help determine whether a contact is inside or outside of IR35, though it is limited in its response and often doesn’t give a clear indication.

The rules are complex and could significantly impact your take home pay, get in contact to find out more.

An accounting expert from Treetops can call you back at a time that suits you.

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