The status of IR35 or off-payroll working has caused some confusion since the repeals to reforms put forward by former Chancellor Kwasi Kwarteng were subsequently scrapped by new Chancellor Jeremy Hunt.
IR35 is tax legislation designed to deal with a form of tax avoidance known as disguised remuneration, where individuals attempt to avoid paying the full rate of Income Tax and National Insurance Contributions (NICs), by providing their services through an intermediary, such as a Personal Service Company (PSC).
Engagers now responsible
The IR35 rules, which originally changed in April this year under the 2021 reforms in the private sector, exist to ensure that an individual providing services via a PSC, and who would have been an employee if they were providing their services directly to an end client, pay broadly the same income tax and NICs as a ‘regular’ employee would.
Under this legislation, all medium and large-sized private sector end clients are responsible for deciding a contractor’s employment status, as opposed to previous rules, where freelancers decided their employment status themselves.
The official guidelines for businesses affected by these rules are as follows:
If the determination results in a contractor being within the IR35 rules, it is your responsibility to deduct and pay tax and National Insurance contributions to HM Revenue & Customs via PAYE.
Where an employer fails to correctly identify a disguised employment scheme, the worker’s tax and National Insurance Contributions become their responsibility.
What businesses does this apply to?
According to the Companies Act 2006, a business is defined as ‘medium’ or ‘large’ if it meets two of the following criteria:
“Richard Anthony case study – Terry Lewis – Jaques Samuel Pianos Widely considered to be London’s leading piano retailer, Jaques Samuel Pianos has grown considerably from its humble beginnings in the front room of Mr Samuel’s home in Notting Hill. They are now internationally recognised and have provided pianos for high-profile clients like Queen and […]”
Terry Lewis – Jaques Samuel Pianos
“Richard Anthony: ‘a super-star firm’ MT Finance is a property finance lender, specialising in bridging loans and auction finance. They assist numerous property professionals, business owners, and individuals with their finance requirements and specialise in short-term asset-based lending. Founder and Director, Tomer Aboody, knew that as an asset-based lender, the business would require an expert […]”
Tomer Aboody – MT Finance
“A family fairground success story The Botton family have been running a traditional fairground, arcade and amusement park in the heart of Skegness since taking over the Pleasure Beach in 1965. Jim, the Director of the company, took over from his father and now heads day-to-day activities and administration. He said: “The Pleasure Beach is […]”
Jim Botton – Pleasure Beach (Skegness)