New legislation referred to as IR35 or Off Payroll Working is due to be introduced in April 2020, but what is it and who will it affect?
What is IR35?
IR35 is an upcoming change in legislation which dictates how tax and National Insurance should be applied in relation to freelancers or contractors who provide services under their own company (also known as an intermediary company).
These changes are being implemented to ensure relevant taxes and national insurance are paid to HMRC.
Posting on the gov.uk website, HMRC outline the off-payroll working rules, which apply if a worker provides their services through a company.
An intermediary will usually be the worker’s own personal service company. They could also be a partnership, a managed service company, or an individual.
The rules make sure that workers, who would have been an employee if they were providing their services directly to the client, pay broadly the same tax and National Insurance contributions as employees.
These rules are sometimes known as IR35.
Who will be affected?
You may be affected by these rules if you are:
A worker who provides their services through their intermediary.A client who receives services from a worker through their intermediary.An agency providing workers’ services through their intermediary.
If the rules apply, tax and National Insurance contributions must be deducted from fees and paid to HMRC.
If you are a sole trader who does not have responsibilities for agency workers, contractors or freelancers - you do not need to do anything.
If you do engage with agency workers, contractors or freelancers - you can use the check employment status for tax service to help you decide if the off-payroll working rules apply.
What's the deadline?
A 'check employment status for tax' assessment (CEST) must be undertaken for all contractors who operate under their own company by 28th March 2020.
Failure to complete the CEST review form is likely to result in the suspension of their services.