IR35 was originally introduced by Gordon Brown in April 2000, also referred to as “Off Payroll Working”. It was introduced to reduce tax avoidance surrounding disguised employees.
From April 2020 the rules for engaging individuals through personal service companies are changing. The responsibility for determining whether the off-payroll working rules (known as IR35) will move to the organisation receiving an individual’s services.
This advice will help your organisation prepare before the changes come in.
How to prepare
- Look at your current workforce (including those engaged through agencies and other intermediaries) to identify those individuals who are supplying their services through personal service companies.
- New provisions only apply to medium and large companies.
- Determine if the off-payroll rules apply for contracts that will extend beyond April 2020.
- Consider whether IR35 applies and if a worker should be self-employed or actually be an employee.
- Start talking to your contractors about whether the off-payroll rules apply to their role.
- Put processes in place to determine if the off-payroll rules apply to future engagements.
- These might include those who in your organisation should decide how payments will be made to contractors within the off-payroll rules.
- Even if companies are compliant from April 2020, HMRC can still go back 4 years for tax and 6 years for National Insurance and apply interest and penalties.
- You can check employment status on the HMRC website: https://www.gov.uk/guidance/check-employment-status-for-tax