A Summary and The History of IR35
Over the next 5 months you will start to hear more and more about IR35 / Off Payroll in the media and via your management teams e.g. Legal, HR and Finance.
If you use interim managers or consultants, then it will affect you. We have been sending and will continue to send out regular info emails about IR35, it’s impact and what you need to be doing.
Or if you’d rather speak to an expert directly then give us a call!
What is IR35 ? In essence, where an interim manager or consultant is working through their own Ltd company carrying out the same role as an employee for the Client, then the Interim Manager should be subject to PAYE and NI. The Employers NI should also be due.
A brief History lesson!
1999 – The Inland Revenue (IR) issued a press release which was number 35. Hence we have IR35! It described the government’s plans to clamp down on “one person” Ltd companies working as a traditional employee but getting the tax benefits of a Ltd company.
2000 – IR35 legislation introduced through the Finance Act 2000. Under this legislation Interim managers were responsible for deciding whether they were inside or outside of IR35. Where inside, the Interim Manger had to pay PAYE and NI. Since then there has been a huge amount of push back from the contracting and business sectors as many felt professional Interims Managers were being unfairly targeted.
2011 – The government pledged to overhaul the way the HMRC had been dealing with the legislation.
2017 – Off Payroll Legislation was introduced where all Public Sector organisations were responsible for deciding if Interim Manager assignments were inside or outside IR35. Many of these organisations made blanket decisions putting projects and roles “inside IR35”. This, in turn contributed to an exodus of contractors from the public sector putting major projects behind and contributed to skills shortages.
2019 – Off Payroll Draft Legislation introduced for the Private Sector. Similar to the Public Sector legislation with a few tweaks, this legislation is targeting a roll out in April 2020.
What is happening in April 2020?
The client will be responsible for making the decision as to whether an assignment or role is inside or outside of IR35. Up until now any potential HMRC liability sits with the Interim manager. This new legislation puts that liability on the fee payer. The Fee payer can be the Client or the Recruitment Agency – whoever is paying the interim. Click here for a more detailed explanation on our website.
Who will it affect?
Clients who engage Interims directly will have a potential liability risk, more administration and Employers NI to pay. Where contracts are deemed inside of IR35 it may be more difficult to attract interim talent.
Interim managers stand to pay significantly more tax if their contract is deemed inside of IR35. With other costs such as Accounts Fees, Marketing, Insurances etc it will make the career choice of being an interim manager less attractive. Many interims will use Umbrella Companies or go on Fixed Term Contracts. Many may raise their rates to claw back these costs which could cost themselves out of the assignment.
What should you do?
Contact us and we can carry out workplace assessments and contract reviews with our legal partner (one of the UK’s leading legal companies protecting business from HMRC employment status challenges) to determine whether the current assignments are inside or outside IR35 and advise on the steps to take now. We do this with all our current and future assignments.
We’ve also launched an IR35 help line where you can speak to an expert about IR35, what you should be doing now and any questions you may have.
Call our IR35 Help Line – 01775828179
Regards,
Den
