At Sphere we have made sure we are fully prepped for IR35 and whether you're a contractor or you hire them into your teams, we're on hand to help with your preparation.
Our Finance Director, Ben Steer outlines what the changes are and how it could affect you.
What is IR35 and what is changing?
IR35 is the “off payroll” regulation and its intention is to tackle the issue of “disguised workers”. This means people who are effectively working as employees of a business (an agency worker) but trying to appear as if they working in a business to business relationship.
As of 6th April 2020 changes to this regulation will have the following impact:
- The fee payer is now responsible for paying tax on those deemed inside IR35 (and will foot the bill for the penalties). This will be either the recruitment agency or end client.
- The end client is now responsible for determining the IR35 status of a relationship (previously the responsibility lay with the contractor)
The changes are designed to stop tax avoidance by taking the decisions and implications out of contractors hands.
If a contractor is found to be inside IR35, deductions will have to made by the fee payer at source. The result will be an average 25% deduction in contractors take home pay.
What makes a contractor outside IR35?
There are many areas that make up a status determination, and ultimately it will be judged on the whole body of work.
However, we see the 3 key areas as:
- Right of substitution – this means the contractor has the right to use someone else to complete the work, who is then paid by the contractors business. This shows a business to business relationship.
- Control – this means the client does not control how and where the contractor works. Not stipulating working hours, allowing work from home (but ultimately the contractor deciding this) and letting them choose how they complete the task. Areas such as no direct line management responsibilities or reporting into anyone in the end client will also demonstrate that the contractor is in a legitimate business to business relationship.
- Financial risk – this means that the contractor takes on responsibility for correcting errors free of charge and has appropriate insurances
How Sphere can help?
We are set up to be fully compliant with any changes, giving you piece of mind.
We can assist with status determinations and making sure you are getting these right.
We can make sure you are advertising your roles in the right way and advise on what rates you should be offering.
We have a brilliant track record and relationship with contractors and can help on any negotiations.
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