Find all the latest legal resources and business advice you need to prepare for the IR35 tax legislation.
Find all the latest legal resources and business advice you need to prepare for the IR35 tax legislation.
Important update for REC members
Updated on 01 June 2021
As a result of an increase in umbrella company related queries coming into the REC Legal Helpline lately, we have put together this factsheet for members working with umbrella companies. The guide brings together the most frequently asked questions into one factsheet and includes guidance for members on how the REC Code of Professional Practice applies to umbrella company arrangements.
Download the REC Guide to working with umbrellas here.
Last minute technical changes to the off-payroll (private sector) legislation – updates to REC contracts and supporting documents.
The off-payroll rules will apply to the private sector from 6 April 2021. Since the 2021 Finance Bill government introduced some technical changes to the off-payroll rules for workers who provide services through intermediaries where the clients are public authorities or medium or large in the private sector. The changes ensure that the off-payoll rules operate as intended.
Government has confirmed that there will be changes to the rules:
the wider definition of an intermediary will be corrected so that umbrella company workers are not within the scope of the rules.
currently the rules apply to contractors, who must have a material interest in the intermediary they work through. Material interest means owning more than 5% of the company; or being entitled to 60% or more of the profits in a partnership. But material interest will change only for companies to include cases where the contractor has less than a material interest meaning the rules will apply if they receive payment that is not deemed employment income and they have any interest in the company.
a targeted, anti-avoidance rule will be applied to arrangements where the primary purpose is to gain a tax advantage by circumventing the rules.
to make sharing information easier, instead of just the worker, the intermediaries will be obliged to confirm to persons in the supply chain whether the IR35 qualifying conditions are met (in terms of what the worker has been paid).
extend the consequences for providing fraudulent information, so where fraudulent information is provided, the liability will be moved to the party in the UK supply chain that provided the fraudulent information.
HMRC has updated its guidance on how to use the Check Employment Status for Tax (CEST) tool to reflect these changes.
HMRC has rewritten its CEST tool guidance following the changes to the off-payroll working rules which came into force in April 2021.
The CEST tool can be used to help hirers, agencies and workers decide on the employment status of an individual and, where appropriate, to decide whether the off-payroll rules apply to a contract.
The guidance notes that HMRC will stand by all status determinations given by the tool so long as the information provided was accurate.
As a result of these last-minute changes we have made some amendments to our template contracts and some of our supporting documents.
We advise members to use these versions of the contracts and template documents going forward and here is an explanation of the amendments we have made:
Off-payroll rules do not apply, as the clients are exempt
Minor amendment to the introductory notes in the contract (not the contract), to simply highlight minor changes to the off-payroll rules from 6th April 2021.
As these contracts are used for umbrella company arrangements, amendments have been made to definition of Conditions of Liability to include non-material Interest and termination clauses, to reflect rules in the public sector.
Amendments have been made to definition of Conditions of Liability to include non-material Interest and termination clauses, to reflect rules in the public sector.
If you missed our webinar series on IR35, you can now purchase a recorded seminar explaining the measures your business needs to take to comply with the new rules.
This seminar is delivered by Bernie Payne of Labolution. Bernie has worked in legal & compliance roles within the staffing industry for over 15 years and has supported agencies and end clients with their IR35 obligations for both the public and the private sector changes. Bernie has been working closely with the REC since she decided to become an independent consultant in early 2019.
Please note that the recording was made prior to 6 April and the information provided was accurate on the date of seminar delivery. To purchase the seminar recording, contact us on 0207 009 2100 or email.
The session explores in depth:
What clients the rules apply to
Status Determination Statements (SDS) - what they are and what's reasonable care
Who is the fee-payer and what are their responsibilities?
Disagreeing with the client's decision and how to manage this
Knowing your liabilities
Commercial and practical considerations for agencies
Key client-focused activities
System and process changes
Changes to contracts and T&C's
Supporting clients with IR35 assessments
Latest IR35 advice from HMRC and REC
Missed our recent IR35 webinar with HMRC? You can now download the slides containing answers to the following:
Which rules will need to be considered from April
How the rules intend to operate for different parties in the chain
How clients will need to consider a worker’s status
IR35 changes are coming into effect in April 2021 - here's everything you need to know
The Finance Act 2020 received Royal Assent in July. It includes the previously delayed off-payroll (IR35) changes – this confirms that the IR35 changes will now go ahead on 6 April 2021. From that date, the responsibility for managing IR35 moves away from personal service companies to clients and fee-payers.
If your client is a public authority, the rules which took effect in April 2017 remain in place (with some amendments).
If your client is a private sector client, you need to know whether they are exempt from the changes or not. Clients who are small or who have no UK connection will be exempt from the changes - when a PSC provides their services to an exempt client the PSC remains responsible for IR35. Use our exempt client declaration form to ask the client about their status.
Who has to do what?
If a client is not exempt, it must provide a status determination statement to both the worker and the party it has a contract with. That statement must confirm whether the engagement is ‘inside IR35’ or ‘outside IR35’. If it is an ‘inside IR35’ engagement, the fee-payer (who has the contract with the PSC) must deduct tax and national insurance before paying the PSC. Employers’ national insurance will also be due. If it is ‘outside IR35’ the fee-payer can pay the PSC gross. See our template client status determination statement.
Preparation
With just one month to go businesses must prepare for the changes. That includes understanding which clients are captured (or not), what roles are filled by PSCs, how clients will make their determinations, who is in the supply chain, what happens to pay and charge rates, how to report payments and what records to keep.
HMRC activity
HMRC have recently updated their Employment Status Manual (in particular look at chapter 8000, 10000 and 11000). This is guidance only but it is useful to understand HMRC’s interpretation of the law.
There has been some public discussion about how a late change to the off-payroll rules (now in the Finance Act 2020) would affect the use of umbrella companies i.e. that the change might require agencies to deduct PAYE tax and national insurance even where there is an umbrella in the supply chain. REC spoke with HMRC on 14 October and HMRC have released this statement to reassure agencies and umbrellas that where the umbrella company deducts PAYE tax and national insurance, the agency does not have to consider the off-payroll rules.
How can we help you prepare for IR35?
REC members have access to a range of legal resources and business support to help you prepare for the tax legislation that's coming into effect in April 2021.
Legal resources including model contracts, legal guides, factsheets, guides and REC's legal helpline to advise your clients and contractors.
Up-to-the-minute updates from the government and REC's experts to keep you informed of the latest developments affecting your business.
Business support from IR35 experts in the form of virtual seminars, interactive webinars, blogs, podcasts and more.
Extended IR35 support from REC's accredited business partners who specialise in this field.
Our legal resources and legal support are for members only - Join today to access these
If you wish to gain access to our
latest template contracts
factsheets
legal guides
legal helpline or
member-exclusive discounts from REC's IR35 partners, then become an REC Corporate member today.
"So important to be on top of the new rules. I can highly recommend this [IR35 virtual] event which I attended recently. I now have all the REC new contracts in place and being used. Thank you to the Recruitment & Employment Confederation you can always be relied upon for the best advice and support."
Michelle Cryer Founder and managing Director, MIDASExec
"Thanks for a great IR35 session. I have to say it was the best IR35 session I have attended, and believe me I must have been at 15 or more. Your presenter Bernie Payne was great, clear and pragmatic."
Kevin Thorn Director, E-Resourcing Ltd
Featured blog: Five Reasons Not to Be Tempted by IR35 Blanket Assessments
Some businesses are being tempted by the idea of making ‘blanket assessments’. They are deciding to put all their contractors into one category, either outside or inside IR35, and if inside IR35 this means that the contractors will be treated like employees for tax purposes. That’s regardless of the role the contractor is actually doing. Badging all contractors the same might seem like a quick fix, but in reality, it only stores up bigger problems for the future.
Making blanket assessments is a big mistake for client businesses and we think it’s bad for contractors too. Here’s are five reasons why.
REC's business partners have been selected for their ability to provide relevant, quality services to our members. Here is a list of specialists suppliers who can support with your IR35 needs.
