Limited Company Contractors, Are You Ready for the Proposed Changes in IR35* Rules?

The change has already occurred in the Public Sector, what I'm talking about here is HMRC's intention to extend it to the Private Sector - where most of you work.

From April 2021 the IR35 Rules for individuals engaged through personal service companies (you) are changing. The important change for you is that the responsibility for determining whether you operate 'inside' or 'outside' of IR35, will no longer rest with you as Director of your PSC. However, guidance on how you may contest this decision is included in the link to the factsheet below.

It is important to note that these changes will not apply to clients who are 'small companies'.**

NDT Resources Ltd has prepared this article to promote awareness of an important change to how your tax status is arrived at - it will be taken out of your hands. You are probably aware of these changes but may be fuzzy on some of the detail. That is why I have included a link to an informative guide from the Recruitment and Employment Confederation (REC).***

You need to be prepared for these changes. If you're operating via a recruitment business, they can help you further and should also be able to assist the client to arrive at their IR35 status decision.

A lot of terms may be unfamiliar to you, so please seek advice from your insurers, legal advisers, or accountant.

What's happening?

The government is extending the off-payroll rules, which have applied in the public sector since April 2017, into the private sector. The new rules will apply to payments made to intermediaries such as personal service companies (PSCs). Importantly, the tests for IR35 status are not changing but the responsibilities for making the IR35 status decision and deducting tax and national insurance are.

What's the difference?

From 6 April 2021, the PSC will no longer be responsible for managing IR35. Instead, the client must assess the IR35 status of each engagement, and if the client finds that the engagement is 'inside IR35', the fee-payer must deduct tax and national insurance before paying the PSC.

When?

The new rules will apply to payments made to PSCs for work done on or after 6 April 2021.'

Please follow the link for further information in the REC's informative guide:

The Off-Payroll rules - factsheet for contractors September 2020

* 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.

** A company which meets two or more of the following criteria (a) annual turnover of not more than £10.2 million, (b) balance sheet total of not more than £5.1 million or (c) no more than 50 employees.

*** The information contained is provided as general background information and should not be taken as legal advice.

NDT Resources Ltd acts as an Employment Agency (introducing candidates for employment by the hirer) and an Employment Business (engaging and supplying temporary workers to provide services to clients) as defined under the Conduct of Employment Agencies and Employment Businesses Regulations 2003.

As always, if you want to let someone else to take the load of recruitment off your shoulders and who understands NDT, then please feel free to contact me for a confidential, no obligation chat. You will be able to spend more time on what you do best!

Comments are disabled