Did you miss our IR35 webinars for contractors operating via a limited business? Don’t worry! We’ve got you covered. Below is the summary of what was said.
WHAT IS IR35?
- Tax legislation designed to identify ‘disguised employees’ in the workplace, effective from the 6thof April 2021.
- IR35 rules ONLY apply to Personal Service Company (PSC) i.e., a limited business. IR35 does NOT apply to PAYE (umbrella) paid workers.
- The key ‘tests’ on whether the IR35 legislation applies to you or not and what our clients will have to take into consideration based on these points below are covered in a gov.uk tool called a CEST (Check Employment Status for Tax):
- Personal service
- Mutuality of Obligation
WHAT HAS AUTOTECH RECRUIT DONE TO ASSIST OUR CLIENTS?
- All contractors need to be assessed via the CEST tool (Check Employment Status for Tax) by the end client. Autotech Recruit team has supported and advised on how best to assess fairly and this has had a positive effect.
- A written determination (SDS – Status Determination Statement) is required from each one of our clients, advising as to how the decision has been reached. We have produced individual role SDS forms, rather than one for each individual limited company.
- Autotech Recruit team has been working hard for the last 2 years, speaking to all clients to ensure they assess fairly, taking reasonable care. It’s looking very positive: 95% of clients (including our biggest client) have assessed Autotech Recruit contractors as outside IR35.
- We can’t stress enough that if you are a limited business, things are looking very positive from our point of view. We would like you to remain operating via a limited business, however, if you do decide to move to an umbrella payment company, we would like you to choose a company from our Preferred Supplier List, which you can obtain by emailing firstname.lastname@example.org.
WHAT DO YOU NEED TO DO NOW IF YOU ARE A LIMITED BUSINESS?
- Whilst you are working for Autotech Recruit, you don’t have to take any action – we are doing it all for you.
- If you work under your own limited business, as positive as the response is from our clients, you still have options as to what’s best for you going forward.
- If our clients make the decision that you’re inside IR35, there could be less work for you unless you move to umbrella PAYE. This is a risk; however, we currently only have one client that has responded this way.
IR35 FREQUENTLY ASKED QUESTIONS
Is there any way around the new rules?
No. We strongly advise contractors to avoid any type of ‘tax avoidance’ scheme, as they may well be forced to repay any unpaid tax, plus penalties. We MUST enforce the message that is government legislation- not just something we have decided to do!
Can I still work for Autotech or another agency?
The simple answer to this question is YES! These are changes to tax legislation and do not place any restriction on your ability to work for any employer.
Will our limited contractors all have to close their limited companies?
No. Contractors wanting to stay Limited regardless will only be able to work in clients that have signed the SDS as Outside IR35 and at the moment that is all our clients bar one.
What’s the financial impact if limited contractors wish to move to umbrella PAYE?
Those who move to umbrella from limited will likely see a drop in net income of approx 20-25%. However, it’s looking highly likely that limited businesses will NOT have to move to umbrella PAYE as most of our clients have deemed our contractors to be outside of IR35.
Our clients do not deem our contractors to be specialists. Does this mean they fall inside IR35?
Specialisms do not come into the factors that determine IR35 status. No one factor determines your IR35 status. IR35 depends on how you work on a day-to-day basis, not how long you’ve been working at one place. It’s true that the longer you work somewhere the more likely you are to be deemed “part and parcel” of the firm. However, provided you can prove one of the main factors against employment, of which there are three main areas, then the time you spend on-site isn’t a defining issue.
Can we put contractors into clients WITHOUT a signed SDS form?
No, failure by a mid-sized or large company to provide an SDS for off-payroll workers means that we cannot process the payment to a limited company- hence why we’re doing lots and lots of chasing clients now!
SOME IR35 MYTH BUSTERS
HMRC will seek to recover backdated tax from all contractors working via PSCs which are found to be inside IR35 by their end hirer.
The new rules only apply to work conducted after 6th April 2021 and if found to be assessed incorrectly, the liability falls with the client, not the contractor. <br></br>
Contractors can provide end hirers with their own determination of their tax status, saving the end hirer the time and cost of considering the assessment themselves.
The legislation requires the end hirer (client) to make the assessment.
If a contractor works a contract inside IR35 for one client, it must mean they are working inside IR35 for every client.
Contractors’ job role IR35 status is assessed on a separate, case-by-case basis and is completely dependent on how they engage with each individual firm. We are asking clients for job role SDS’s rather than an individual contractor assessment.
When a client assesses inside IR35, for you to do work in that client, going into PAYE is the only option.
Quest pay, one of our partner umbrella companies on the PSL, can offer a ‘sole trader way of being paid. This means you can still work for a client who has determined an inside IR35 assessment, and you are deducted the correct amounts of tax. This does not require you to be registered as an umbrella PAYE. Please contact them for further information.
We hope you will find the above information useful. We have been very grateful for all the positive feedback we have received after our IR35 weekend webinars:
To you and all the team, all the stuff you provide, all the people I speak to day to day, I think you’ve really got our backs. I think you’re doing really good!
Thank you very much for zoom webinar regarding IR35. It was very helpful. If I need more information I will contact you. Thanks once again.
Thank you for your input into the webinar, it was interesting & helpful. I know you do a lot of work to make our lives as contractors run smoothly & I as one appreciate it, thanks again.
Thanks Faye and the team, it was very interesting.
Very useful information. Thank you to the Autotech Team ?
Took part today but had a glitch at the end – so just wanted to say that all the hard work you guys put in, is greatly appreciated!
If you have any further questions, please don’t hesitate to contact your consultant.