As of April 2021, it is the responsibility of our clients to determine whether the non-payroll work rules apply, i.e. whether this assignment is “under IR35”? Companies can refer to HMRC`s guidelines and the Employment Status Instrument for Taxes (CEST). Although the feedback is diverse, the CEST tool gives good control of HMRC`s approach and the indicators they are looking for. HMRC has confirmed that it is making further enhancements to the CEST tool, and these changes are expected to be made before the end of 2021. TH aims to work in consultation with clients who want additional support with their assessments and who wish to review a wide range of potential partner service providers such as Grant Thornton and Brookson. Here we explain what the IR35 rules are and who may be affected by the changes from April 2021. The client must decide your worker`s employment status and decide if the rules apply to work outside of payroll. The customer must then tell your employee his determination and the reasons for it. HMRC goes on to say that the non-pay rules apply if the contractor “was an employee if there was no intermediary.” In many cases, the intermediary is the entrepreneur`s limited liability company (often referred to as a personal services company).
The new rules only apply to medium and large private sector companies that use the services of the employee and the fee payer, if different, such as . B payers in the recruitment sector. The new rules made no changes to the payroll tax status test, which determines whether a PSC contractor falls under the IR35. However, the test is complicated and can lead to uncertainties as to whether IR35 applies to a contractor. All companies that offer staff or managed services must ensure that their terms and conditions are up to date so that all contracts they enter into before April 2021 include conditions that comply with IR35. Depending on whether the company provides personnel or managed services, different formulations are required. Some companies operate different business models, including hiring staff, providing staff to customers, and/or managed services, while using very similar or even identical terms. For these companies, it is advisable to delineate their business models, create separate terms for each model, and train those who use them on when to use which terms. The 6. In April 2021, sweeping changes to the UK`s IR35 off-payroll rules came into force and, despite a 12-month delay in implementation, detailed HM Revenue and Customs (HMRC) guidelines and subsequent legislative changes, areas of uncertainty remain. Following the introduction of ir35 reforms in the public sector in 2017, it was confirmed that the new rules will now be extended to the private sector from April 2021. These changes are not retrospective.
The Ir35 rules were originally introduced in the UK in 2000 to ensure that people who work as employees but work through a personal service company (PSC) pay roughly the same taxes and social security contributions (NIC) as an employee. Following the announcement of the 2021 budget, the Chancellor confirmed that the new IR35 rules will be adopted from 6 September 2021. April 2021. It was hoped that the proposed changes that affect most contract workers – those paid through a personal service or intermediary company – would be postponed, but it has now been confirmed that they will continue. Many clients and service end users have already implemented changes or shared their approach, and Taylor Hopkinson is working hard to support those who have not yet completed this process. While there is nothing wrong with continuing to hire contractors through a PSC, IR35 regulations create a significant administrative burden for the end user. Other resource options that do not affect PSCs (thus avoiding the application of IR35) include: Entrepreneurs who are not tax residents in the UK and provide their services exclusively outside the UK are also not affected. If they provide certain services in the UK, the rules are more complex and you should ask us for advice. Under the non-payroll rules, starting in April 2021, private sector clients will be responsible for determining a contractor`s IR35 status. The decision must be included in a Statement of Determination of State (SDS) next to the customer`s justification.
Property tax employees must pay 20% income tax above the personal allowance up to £50,000 (rising to £50,270 in 2021-22) and 12% in Social Security on incomes between £9,500 and £50,000 in 2020-21 (£9,568 to £50,270 in 2021-22) and 2% on all income above. Employers also contribute 13.8% to NI payments, which exceed the £9,500 threshold for each employee in their payroll. IR35 is another name for work rules outside of payroll. It is designed to assess whether a contractor is a true entrepreneur and not an employee “camouflaged” to pay taxes. It is up to the company hiring the person to judge whether they are inside or outside the IR35 rules, and could face repercussions if this is false. When a contractor provides services to a small private sector client, the employee`s intermediary is responsible for deciding whether the rules apply. While the deferral was welcome – not least because it reduces the administrative burden and cost of using contractors – businesses need to review how they work with contractors by April 2021 and ensure that the change does not create or increase the latent risks of IR35. As part of the reforms, the responsibility for assessing whether IR35 is applicable will be transferred from the contractor/PSC to the end user.
If the end-user determines that IR35 is applicable, responsibility for the operation of PAYE and NICs shifts from the PSC to the “fee payer”, that is, the entity that contracts directly with the PSC. The reforms apply to all payments made on or after 6 September. April 2021, unless all of the Contractor`s work was completed prior to that date. The government responded to the report by reaffirming its commitment to introduce IR35 reforms in April 2021, and the provisions have now been enacted into the 2020 Finance Act, which received Royal Assent on July 22, 2020. The government has indicated that it will conduct further research on the long-term impact of public sector reforms, but this is unlikely to lead the government to abandon, fundamentally rethink or delay IR35 reforms. Our advice is therefore to make sure that you are ready for the entry into force of these rules in April 2021. However, in response to widespread non-compliance, the government decided to transfer responsibility for the IR35 assessment to the company that hires the PSC contractor, often referred to as the “client.” The reason for this was that it is easier to investigate a company to collect unpaid taxes on several entrepreneurs rather than follow individual entrepreneurs. Large companies also tend to be more risk-averse and therefore more likely to follow the rules. .
