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.
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 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.
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.
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.
Half-day IR35 seminars - Book your spot now
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.
"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."
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.
