IR35, also known as the ‘off-payroll’ working rules is changing from April 2020. It has been in the press a lot lately because it has been affecting TV presenters – and it’s been making headlines because it affects them so much. What does it mean for you though?
The new rules will now affect the private as well as the public sector, from any industry and whether you’re working through a limited company or a sole trader. It’s all to do with the relationship between you and your client and whether that could be considered an employer/employee relationship.
An intermediary will usually mean the worker’s own limited company. It could also mean a partnership, a managed service company, or an individual who comes under self-assessment.
The rules: the IR35 legislation makes sure that workers (you), pay broadly the same tax and National Insurance contributions as if you were an employee contracted directly.
Whose decision is it?
Before 6 April 2020: If you are a worker and your end client is in the public sector, it is their responsibility to decide your employment status. They should tell you their decision, some larger companies are starting to make changes to their arrangements already with their subcontractors in preparation for the change in April 2020. Remember: this will affect everyone, even people who employ a cleaner, or a subcontractor in the building industry. IR35 takes precedence over any other rule, e.g. CIS scheme rules.
If you are a worker and the end client is in the private sector – and this includes charities – it is your intermediary’s responsibility to decide your own employment status for each contract.
From 6 April 2020: All public sector and medium and large-sized private sector clients will be responsible for deciding if the rules apply.
If the worker provides services to a small client in the private sector, the worker’s intermediary will remain responsible for deciding the worker’s employment status and if the rules apply.
What does all this mean and how do we treat it within my accounts if I run a limited company?
Broadly speaking, you will need to make an assessment on each contract you have. If they come under the IR35 rules then the ‘sales’ you receive for that contract must be run through your payroll as if you were a worker directly employed. That way you will pay the same tax and National Insurance as anyone else that may have been directly employed by the end client.
How do I assess each contract?
HMRC have a calculator on their website to help you assess each contract and will tell you if you need to comply with the rules. Click the link below to get to it.