
Template contracts
We've conducted a full review of our template contracts, to reflect upcoming changes to the off-payroll (IR35) rules, and to reduce the number of contracts members have to manage.
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 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.
With just two months 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.
REC Legal have updated contracts. We have also produced three new infographics – one for agencies to use internally and one each for agencies to use with their clients and contractors. Please keep an eye on this IR35 hub, our Legal bulletin and bitesize, and the IR35 section of the legal guide for updates.
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.
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.
The REC has been urging Government to delay the IR35 reforms in the private sector for another year. Delaying the reforms would grant Government time to regulate umbrella companies and also consider alternatives to the off-payroll rules which do not treat people as employees for tax purposes when they do not enjoy the rights of employees.
Ornella Nsio, REC's Stakeholder Engagement Manager outlines why 2021 should not be the year of IR35 implementation.
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.
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.
If you're not an REC member, talk to us today about joining our network and start accessing all the help available to prepare for April 2021.