IR35 hub: Your one-stop-shop for the latest legal advice and support
Guest blog by Matt Fryer, Group Compliance Director at Brookson Legal.
For businesses that engage with contractors, the forthcoming changes to the off-payroll rules – or IR35 – present one of the biggest challenges in recent years.
IR35 requires businesses that engage the services of contractors operating through their own limited company to consider the employment status of that contract. This is done by carefully assessing the contract that has been agreed, as well as the current working practices, in order to conclude whether contractors are acting as “disguised employees” and are therefore deemed inside IR35.
In order to satisfy HMRC guidelines, this needs to be done taking “reasonable care” to ensure that the employment status decision is correct. Once they have been found to be inside or outside of IR35, this outcome then needs to be provided to the worker, and any intermediary supplying the worker, prior to 6 April 2021.
Given that businesses have not had to consider this before, it may feel like a daunting exercise.
As such, some businesses have already taken the view that this is too difficult for them and have significantly reduced the number of limited company contractors, with some mandating that all contractors must be engaged via an employed route and subject to pay as you earn (PAYE).
Despite some large organisations applying these blanket approaches– the businesses that Brookson has engaged with are taking a rational and commercial approach to the changes.
We are running a series of practical virtual seminars this year ahead of the April 2021 implementation date. Attend one of these interactive seminars to gain a practical understanding of everything you need to do to prepare your business for IR35. Book your spot today.
With the above steps in mind, it is critical that hirers start documenting their IR35 journey now. Having this information on record will help firms to resolve any enquiries from HMRC quickly and robustly. Written documents will also help hirers prove that they have acted with reasonable care if challenges arise.
It’s worth reiterating, however, that IR35 is complicated tax law and hirers should be getting advice from specialists wherever possible. Seeking expert support, such as that from Brookson Legal, will help businesses to navigate the complexities that come with assessing contractors on an individual basis, and it will also help put the right policies, processes and structures in place to ensure long-term compliance. This should be the end goal for all hirers– especially those who want to continue benefitting from valued contractor talent in the future.
About the author:
Matt Fryer, Head of Brookson Legal, is a Chartered Tax Advisor with 18 years' experience of advising on tax planning and compliance. Matt has been with Brookson since 2009, having previously worked for Big 4 accountants, KPMG and PwC. Matt’s primary role is to ensure that the services provided by the Brookson Group comply with relevant legislation and regulatory requirements. Matt is also a Board member of the FCSA, the UK's leading membership body dedicated to promoting supply chain compliance for the temporary labour market.
Originally published on 12 December 2019. Updated on 8 December 2020 for accuracy.
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