The burden of IR35 is shifting onto the hiring business

The burden of IR35 is shifting onto the hiring business

Do you engage a contractor through a personal service company? From April 2020 the responsibility for assessing whether the IR35 rules apply to a contractor will fall on the hiring business for all but the smallest businesses.

If you are a medium or large business and use contractors who provide their services through an intermediary (generally an agency or a personal service company) then you will need to consider whether the IR35 rules apply, if they do you will have to apply PAYE and National Insurance contributions to payments made to the contractor.

Smaller businesses will not be affected by the rules and the contractor will still be responsible for determining their IR35 status and paying tax accordingly. Whilst there is a change in responsibility for assessing the relationship, the rule changes should not mean that a contractor previously outside IR35 will now be caught.

The IR35 rules are infamously complicated and the penalties for an incorrect employment determination can be significant for both parties. Careful consideration should be given to the terms of contracts and working practices.

Similar rules were introduced to the public sector in 2017 and not without problems. HMRC are currently reviewing feedback on the likely effects on the private sector and we expect them to publish their findings and finalise the rule changes by September 2019 ahead of the Budget.

If you have any concerns about whether you or your business are potentially caught by these rules and their impact, then please get in touch.

We can review your current practices, assess whether you are ‘inside’ or ‘outside’ IR35 and explain the implications.

We will continue to keep you updated on any developments, however if you have any concerns in the meantime, please call your usual Creaseys contact on 01892 546 546.