With changes to IR35 in the Private Sector looming, there’s no better time to arm yourself with our free FAQ’s, Guides and Video guidance that you can reference whenever you need.
The IR35 Private Sector changes will not apply to “small” hirers, and contractors who provide services to small hirers will still be required to assess their own status, on an assignment by assignment basis. The Government says that it intends to use similar “small company” criteria to those defined in the Companies Act 2006, which sets balance sheet and turnover thresholds and says that a small company is one with fewer than 50 employees.
As is the case in the Public Sector today, from April 2021, Private Sector hirers will have to determine the employment status, for tax, of the contractors that they engage. Having determined the contractor’s status, Private Sector hirers will then have to inform the “fee payer” (usually the supplying agency) whether the contractor should be paid net or gross. In making these determinations, Private Sector hirers will have to apply employment case law.
The Public Sector legislation says that, in applying the new rules, Public Sector hirers must exercise “reasonable care”. It is very likely that the same standard will apply in the Private Sector. Unfortunately, HMRC have given little guidance on what “reasonable care” means in the context of these new IR35 rules but, looking back at previous HMRC guidance on reasonable care, it is likely that the standard will be high, as HMRC will view most Private Sector businesses as having the necessary financial and human resources to do this properly. The objective for Private Sector hirers should be to take advice and put in place policies and processes that will enable them to persuade HMRC that they have taken “reasonable care”. If a Private Sector hirer is unable to demonstrate that they have taken reasonable care, they will assume the Income Tax and National Insurance risk arising from having got it wrong.
No, not at all. Genuinely self-employed contractors will continue to operate as self-employed after the Private Sector rule changes. With the correct advice, there will also be many contractors whose working practices and contracts can be tweaked to ensure that they stay outside of IR35. It is likely that most contractors who are very clearly caught by IR35 will wish to continue to provide their services in a flexible way and hirers will have to engage with them in a PAYE-compliant fashion, such as through an umbrella company.
No. Being deemed an employee for tax purposes does not automatically mean that the contractor is an employee for the purposes of employment rights, such as holiday pay, sick pay and redundancy. However, we have seen in the Public Sector some contractors, deemed as employees, for tax, by their hirers, bringing employment-type claims against their hirers, so hirers need to tread carefully.
Written by our experts, these guides will give you the tools to understand the implications of IR35 as a contractor, recruiter or hirer.