IR35: Everything you need to know

What are the IR35 changes?

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The IR35 changes are adjustments to the IR35 legislation covering off-payroll working. These changes to the IR35 legislation will primarily affect the private sector and those working self-employed as contractors providing services through an intermediary. The changes will ensure proper regulations take place over Income Tax and National insurance contributions for those contractors. 

When using an Umbrella Company such as ourselves, you as a contractor give the responsibility of handling IR35 tasks to us and face zero risks of fines for tax fraud, whilst still getting paid the correct amount.

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Who will be affected by the IR35 changes?

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The changes to the IR35 legislation will affect:

•    a contractor who provides their services through their intermediary, if classed as an employee.
•    a client who receives services from a contractor through their intermediary.
•    an agency providing contractor’s services through their intermediary.

If under any of the above and the changes apply to you, Income Tax and employee National Insurance contributions will need to be deducted from fees and paid to the HMRC. The amount required will be that of an employee working under an employer.

 

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What is an intermediary?

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An intermediary is a party that operates to make arrangements for, or pays, an individual to work for a third party. The intermediary can be any of the following:

•    A partnership
•    A personal service company
•    An individual

Umbrella Companies such as ourselves, do not count as intermediaries and allow you to avoid paying any financial fee’s when working as self-employed. 

 

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How does it affect contractors?

 

In summary, contractors providing services to a medium or large-scale private sector client should receive an employment status determination from their client as well as the reasoning behind the determination. These determinations will help decide whether the off-payroll working rules apply to the contractor. If the rules do apply to you, a ‘deemed employment payment’ will need to be calculated, establishing the amount the contractor earns after employer National insurance contributions have been removed.

There are no changes for contractors providing services to small businesses in the private sector. The intermediary will remain responsible for determining the contractor’s employment status and whether the rules apply or not.

 

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How does it affect clients?

 

The role of a client running a medium or large-scale private business will be to issue the contractor providing a service, an employment status determination as well as the reasoning behind it.

 

For more information directly from the gov.uk website, click here: https://www.gov.uk/topic/business-tax/ir35