IR35 SUPPORT FOR CONTRACTORS
Morson IR35 Contractor Support Hub
WHAT IS IR35?
IR35 legislation is changing in the private sector
IR35 is HMRC tax legislation - to ensure that LTD company contractors are not simply operating as self-employed contractors in order to avoid paying employee level tax and NI.
Unlike the original April 2020 deadline, which was impacted by a General Election, Brexit decision and other significant political and economic factors, this 12-month extension has provided clients with time to reset the IR35 agenda and proactively plan with a clear and confirmed deadline in mind – April 2021.
During the coming months, end clients that engage contractor populations will be required to undertake a full review and correctly define the IR35 status of every off-payroll worker who provides services through a personal service company (PSC / Limited company).
From April 2021, contractors deemed 'in scope' will be required (in most cases) to operate either via PAYE or via an umbrella companies PAYE models.
We want to ensure you have the right tools to support you through any changes, you may find the below resources helpful in regards to pay information.
Note: these are external sites and thus any calculations given are not our own and are illustrative.
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What happens now?
Some clients may have already informed their contractor populations of their IR35 processes and timescales, with others expected to do so over the coming weeks and months. Our IR35 team are advising clients to action this sooner rather than later.
The assessment and determination process is outlined below:
Your client will perform a review of your role to determine whether it is deemed as inside or outside of IR35
The outcome will be communicated to you in a status determination statement (SDS) and will include your clients’ reasons for reaching this conclusion
If you are deemed to be inside of IR35, then this will require you to alter the way you provide your services to the end client, either via a PAYE contract or a compliant umbrella PAYE solution.
Every organisation has a duty of care to their workers, and against the backdrop of COVID-19, it has never been more important to prioritise talent. Should any client, however, fail to inform either you or Morson of their SDS ahead of the April deadline, we must assume that you fall inside of IR35 and ultimately safeguard the interests of everyone involved.
Whatever this determination may be, we are on hand to help you understand your options.
Our list of approved Umbrella providers
Champion Contractors provide accountancy and tax support services to freelance contractors throughout the UK. We understand the unique needs of contractors and deliver a service, tailored to your specific requirements.
If you decide to join the Champion umbrella/employment solution, you will be entitled to statutory payments and insurances including a personal accident scheme at no extra cost.
Other benefits include:
- Continuous employment for all of your assignments
- The option to make ‘Salary Sacrifice’ pension contributions
- Free access to Champion Rewards (savings of up to £200 per month)
- Champion Fuel Card (savings of up to 20p per litre at BP fuel stations)
- The option to be paid weekly or monthly – you choose!
- Simple application process – online or over the phone
Chris Bloor is the Champion account manager within Morson and has personally supported our contractors for more than 10 years. He can be contacted directly by emailing firstname.lastname@example.org
Click the button below to learn more about the benefits and to view our exclusive Morson package.
IR35 is the biggest piece of legislation to hit the contractor landscape in recent history. We are committed to supporting our contractor community and recently ran a survey to understand your views.
IR35 specialists, Chris Bloor from Champion Contractors and Phil Beardwood, Compliance Director at Morson, answer some of the most common questions to help you understand and adapt for the new rules.
What does inside IR35 mean?
Inside IR35 is an individual who is supplying their services through a PSC but would otherwise be regarded as an employee of the end-client.
If deemed inside, payments received by the PSC would be subject to tax and National Insurance (NI) as if the individual were employed by the end client. The resulting tax liability would fall upon the contractor.
One of the main changes as of April 2021, is that the responsibility for determining this status will move from yourself to your end client.
Who would HMRC pursue if they determine someone is inside IR35. Would it be the contractor or the end client?
Post April 2021 the fee payer (the agent) would be the first point of investigation, pre April 2021 any liability will lie directly with the PSC.
How will IR35 effect contracts that will be part way in when the legislation comes into force?
If the role is determined within the scope then contracts will be terminated and the payment model of either PAYE or Umbrella Company will be available. If deemed outside of scope then the contract will continue with any future tax liability moving to the Fee Payer post-April 2021 and staying with the PSC for contracts pre April 2021.
Are PAYE and Umbrella the only options?
Not necessarily, but these two payment models will be more prevalent in the market place to ensure full compliance.
Will sub-contractors be offered permanent positions?
The client may well take the opportunity to offer some contractors permanent roles based on business strategy.
How will Morson support me in any potential IR35 negotiations with my employer?
Morson will work in collaboration with clients and contractors to ensure that reasonable care is demonstrated by the client when making assessments relating to the IR35 status of all individuals. We believe most clients will expect this exercise to be cost neutral as there may well be already established PAYE rates against the role. If an individual is determined to be inside IR35 then they will be offered the option to be paid PAYE by Morson (or PAYE through their PSC) or via a Morson PSL Umbrella Limited Co.
Is there a definitive way to define IR35 status?
Undertaking an ESI (Employment Status Indicator) test based on both working practice and the way a business is perceived will give an indication of potential tax status.
How will IR35 effect my tax payments and wages?
If deemed within scope (inside IR35) and you wish to continue to be engaged via your limited company then a new contract will be issued and the rate will be subject to both tax and all NI deductions by the fee payer. Please speak to your accountant/adviser and they will be able to better advise you on the potential financial consequences.
How are agencies working with end clients to ensure minimum disruption to the market?
We are encouraging clients to put in place project plans with key dates/milestones in advance of the legislation date and will offer contractors ongoing support once clients pass the status decision down the supply chain.
Would I be liable for past PAYE tax if I was found to be working outside IR35?
HMRC have stated that then do not intend to seek tax retrospectively however this approach could not be ruled out.
CONTRACTORS | FAQs GUIDE
Download our FAQs
IR35 specialists, Chris Bloor from Champion Contractors and Phil Beardwood, Compliance Director at Morson, answer more of your questions in our comprehensive FAQs guide. Click the button to download your copy.