IR35 is a well-trodden path for consultants and contractors, but new changes to the tax rules put the onus on the business hiring the contractor. Also known as “off-payroll working” rules, IR35 has been introduced to help HMRC tackle tax avoidance through off-payroll working. The rules originally came into force in April 2000 to deal with what it calls ‘disguised’ employment, whereby a worker should be paid as an employee and not as a PSC (Personal Service Company). Despite having been in force for all those years, IR35 is heavily criticised by tax experts and the business community as a whole.
Under the new rules, end-client businesses which engage contractors (whether directly or in directly via agencies) must determine whether or not they are medium or large-sized businesses for the purposes of the IR35 legislation. If they are, they must:
- Make a status decision for each and every engagement of a contractor via a PSC
- Demonstrate reasonable care in its decision-making process
- Communicate that decision to the relevant parties* via a Status Determination Statement (SDS) which gives reasons for the decision
- Create and operate a ‘client-led disagreement process’ for any challenges to the SDS by a contractor. These challenges must be responded to within 45 days and give a “reasoned response”
Working in collaboration with our strategic partner Markel, we’re helping clients to understand who could be affected by the rules and what they need to do to protect themselves.
For further information, read some of the FAQs from Markel.