New IR35 Legislation – what is it and what do you need to do?

The IR35 rules make sure that contractors pay the same tax and National Insurance contributions as equivalent employees. However, there are changes coming into effect in 2020.

We have put together information on what is changing, when it is changing and who it will affect so you can ensure that your company is prepared.

What is IR35 Legislation?

IR35 is the name given to off-payroll tax legislation designed to stop tax avoidance by workers supplying their services to clients via an intermediary. The intermediary will usually be the worker’s own limited company but could also be a partnership, managed service company, or an individual.

When do changes to IR35 legislation come into force and what are they?

From 6th April 2020, the responsibility for setting a workers’ IR35 status will lie with the companies engaging the contracted workers, rather than with the contractor themselves.

From this date, all public authorities and medium and large-sized clients will be responsible for deciding whether workers should be classed as employed or self-employed.

Who will the new legislation affect?

This new legislation will affect:

  • workers who provide their services through their intermediary
  • clients who receive services from a worker through their intermediary
  • agencies providing workers’ services through their intermediary

The liability will be handed from the worker to the fee payer – such as a recruitment agency.

What do you need to do?

Before 6th April 2020

If you’re a worker and your client is in the public sector, then it is their responsibility to decide your employment status and inform you of their decision.

If you’re a worker and your client is in the private sector, it is your intermediary’s responsibility to decide your own employment status for each individual contract. 

After 6th April 2020

All public sector authorities and medium and large-sized private sector clients will be responsible for deciding if the new rules apply.

If a worker provides services to a small client in the private sector, the worker’s intermediary will remain responsible for deciding the worker’s employment status and whether or not the rules apply.

If the rules apply, tax and National Insurance contributions must be deducted from fees and paid to HMRC.

Magpie Accountancy’s advice on the new IR35 legislation

It is vital companies are ready for the IR35 legislation changes in advance of 6th April 2020 by putting processes in place now to manage the changes.

Reasonable care should be taken when deciding the employment status of a worker. Failure to do so will result in the worker’s tax and National Insurance contributions liability becoming your responsibility.

You can use the Check employment status for tax service to help you decide if the off-payroll working rules apply.

If you have any questions or would like more information about IR35 legislation please feel free to get in touch with us here at Magpie Accountancy to discuss in more detail.