IR35 is the name given to a tax legislation that aims to ensure those who work through their own company often known as a ‘personal services company’ or a limited liability partnership pay employment taxes and national insurance contributions (NICs) in a similar way to their permanent counterparts. The aim of this is to specifically challenge those who in the eyes of HMRC should be classed as ‘disguised employees’. In simple terms the HMRC do not recognise the contractor as ‘self employed’ and should therefore be liable to the same taxation rules as a permanent employee.
These new reforms come into effect on 6th April 2017.
Options for PSC’s moving forward
Move to a PAYE model – we will provide the calculation that will be applied to work out the correct PAYE pay rate.
Move to an Umbrella model – Procurement People can provide details of Umbrella companies for you to utilise.
Deemed Employment – Continue to provide services through their PSC. The invoice amount, less VAT, will be subject to PAYE at a rate according to the tax code provided by HMRC
Deemed outside of IR35 – Client and Contractor need to complete HMRC decision tool and provide this as evidence.
For further information on the full technical note please click on the link provided: https://www.gov.uk/government/publications/off-payroll-working-in-the-public-sector-reform-of-the-intermediaries-legislation-technical-note.
Find out if IR35 applies
Further information can be found at https://www.gov.uk/guidance/ir35-find-out-if-it-applies
Take the test
Follow the guide and take an anonymous online test to check your status at https://www.gov.uk/guidance/check-employment-status-for-tax