The Government and HMRC have confirmed new changes to off-payroll working (IR35) rules effective from 6th April 2021. This will affect any contractors working through a Personal Service Company, Recruitment Agencies, and all Large and Medium-sized end clients whose roles fall inside of IR35. These workers will be required to have tax and National Insurance Contributions (NIC) deducted from their income at source.
As the end-client, you are required to determine whether or not your off-payroll workers fall inside or outside of IR35. As the end-client you are also responsible for informing us, the agency, what your status determination is.
You can determine a contractor's IR35 status by using HMRC's CEST Tool
If you have any questions regarding IR35 or would like some support, please don't hesitate to email us at IR35@maxximagroup.com
What is IR35?
The UK's IR35 legislation is a set of tax laws that are designed to ensure that contractors pay the same Tax and National Insurance contributions as an equivalent employee. There is a series of tests used to determine the tax status of contractors working through personal service companies (PSCs).
IR35 is not a new set of tax laws. The 2021 reform will bring private sector IR35 in line with the public sector, where the reform was implemented in 2017.
As of 6 April 2021, companies in the private sector will be responsible for determining the IR35 status of workers.
Are you required to issue an IR35 status determination statement?
One important requirement being brought in by the new rules is the end-client must confirm the IR35 status of a worker by providing a ‘Status Determination Statement’ (SDS) to the PSC worker. Maxxima must also receive a copy of the relevant SDS. The only exception will be if we have a pre-determined classification from the organisation (e.g. they are classed as a “small business” and are therefore exempt from the legislation changes).
Small business exemption to the new rules
There’s an exemption for end-clients who are ‘small businesses’ (as defined by the Companies Act 2006) which means meeting two or more of the following criteria:
Annual turnover is under £10.2 million
Balance sheet total is under £5.1 million
Under 50 employees.
Where the end-client meets two or more of these criteria, responsibility for determining the IR35 status of an assignment remains with the PSC and the changes do not apply.
Who is responsible for making this status determination?
The organisation’s Purchasing, Hospital, Medical, Finance Directors/Managers should be able to supply this information, so we would encourage that these avenues are investigated at first point of contact. Should you be unable to locate a suitable person/team, please let us know and we will do our best to help.
How do I determine a contractor's IR35 status?
Use the HMRC employment status tool to find out if a worker on a specific engagement, should be classed as employed or self-employed for tax purposes. You can complete the employment status by following this link.
What do I do if the worker challenges an IR35 status determination?
HMRC have determined that the results of the employment status tool are biding. You can complete the employment status tool by following this link.
Alternatively, if the organisation is classed as a “small business”, then immediately they are exempt from the legislation changes.