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Are you ready for IR35?

IR35

The IR35 rules that were postponed from April 2020, are set to be implemented in April 2021. These changes will potentially have a significant impact on how businesses engage with contractors. 

From 6th April 2021, if you are a private company engaging contractors and you satisfy two or more of the following criteria:

  • Annual turnover of more than £10.2 million
  • Balance sheet total more than £5.1 million
  • Number of employees more than 50

then it will be YOUR responsibility to determine whether a contractor should be defined as an ‘employee’ for tax purposes.

You should be making the determination before the start of the engagement and gather evidence to demonstrate that you have taken reasonable care in line with HMRC’s guidance. HMRC recommends utilising their own online CEST tool to help determine a contractor’s status.

Having made your determination, you will then need to pass a status determination statement (“SDS”) to:

  • the individual contractor; and
  • where the contractor is supplied through a more complex supply chain (e.g through an agency), the entity immediately below the client in that supply chain.

Your determination statement must include whether you consider the contractor should be treated as an employee for income tax purposes, and the reasons for that conclusion. There are various factors that could affect your determination. The process involves not only assessing contractual documentation but also assessing the working arrangement as a whole.

In light of the recent case law, we recommend that any private companies affected should commence an audit of their existing arrangements with contractors without delay.

We can assist you in any employment matters including issues relating to IR35. Please contact Karl Thomas, Partner and Head of Employment and Dispute Resolution at Loosemores Solicitors via ThomasK@loosemores.co.uk or call 029 2080 3112.

We offer a range of employment and HR services that you can access as and when you require. Please visit Loosemores HR for more details.

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