What is IR35?
IR35 is the common name for the Intermediaries Legislation, which was first introduced in April 2000. In essence it was designed to tackle what HMRC described as “disguised employment”. It targets individuals who are providing their services through their own limited company (PSC) or partnerships (Both General and LLP’s).
Why was IR35 introduced?
IR35 was introduced essentially to tackle Tax Avoidance where Clients and Agencies engaged workers on a self-employed basis via their intermediary and if this Corporate Veil was removed, they would in most cases be deemed an employee. The benefit to the Client and/or Agency was the saving of NIC’s and more importantly engaging Contractors without any employment rights or benefits.
How is IR35 changing?
From April 2020 all End User Clients with more than 50 Employees and more than £10.2 million turnover, will be given the responsibility of determining the Contractors Status and decide if they either fall inside or outside of the new rules. This change will see the rules that were implemented into the Public Sector in 2017 align with the Private Sector.
In cases where the Contractor is deemed to be within the rules, the payee of the PSC, be it the End User Client, Agency or other Intermediary will be required to deduct PAYE from the payment made to the Contractor. Where the intermediary or Agency fail to apply the rules, the End User Client could be held liable for the Taxes and NIC’s that have not been deducted and paid.
How can Evro help?
Since the Draft Legislation was released on the 11th July 2019 we are in dialogue with our clients across the UK and it is our intention to assist them and their Contractors to plan for this important change. We are working together with them in categorising their workforce and this is based upon our previous experience of working with Clients and Contractors in the Public Sector.
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