what is ir35?
What is happening in April?
- Following an emergency decision to delay the reforms in light of the Covid-19 outbreak, the government announced that IR35 reforms would apply in the private sector from April 2021.
- The responsibility for making IR35 status assessments will transfer from the contractor to the end client, who must then communicate their decision to the worker via a Status Determination Statement.
- The responsibility for administering Income Tax and NICs will lie with the “fee payer” – the entity that pays the limited company, which will typically be the client, the agency or the umbrella company.
IR35 is tax legislation designed to assess whether someone is a genuine contractor rather than a ‘disguised’ employee, for the purposes of paying tax.
Read on to find out all you need to know about IR35
What is a status determination statement? (SDS)
A status determination statement is a document that summarises the contractor’s IR35 status and the end client’s reasoning for this status.
Issues with IR35 Reform
A number of tax tribunals have proven that the government’s self-assessment tool, CEST, is unreliable. There has also been evidence of widespread blanket assessments and bans on limited companies in the lead up to reform.
What do contractors need to do?
- Initiate conversations with their agency and/or end client to establish opinions on whether the contract is inside or outside scope of IR35. Ensure that the SDS reflects the contract and daily working practices.
- Understand that, as was the case in the public sector, end clients and agencies will be inclined towards inside IR35 determinations in order to reduce their risk of liability.
- Prepare for this by engaging the services of a reliable and compliant Umbrella Company. Find out why contractors need to act now, in our article here.
What are some of the criteria used to make an Inside or Outside IR35 decision?
Outside Contractors
- Set their own hours
- Use their own equipment
- Have flexibility around working location
- Can substitute an equally qualified contractor if needed
- Are not subject to Supervision, Direction or Control in their daily duties
Inside Contractors
- Set hours directed by end client
- Have a fixed location
- Use of end client’s equipment
- Cannot substitute anyone in their place
- Are subject to Supervision, Direction & Control in their daily working practices
How can Amaze Umbrella help you?
- When you register with us, Amaze Umbrella becomes your employer, paying you through our PAYE.
- This provides you with a fully compliant, FCSA approved IR35 solution, ensuring that the correct tax and NICs are deducted at source.
- Work on a range of contracts but with only one payroll point, simplifying your tax arrangements and employment benefits.
Speak to a member of our team on 0161 464 8993 for more information, or to register and make contracting easy.
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