LET’S GET PRACTICAL: IR35 changes less than 3 months away! Top Tips to Prepare…

IR35 are tax rules that apply when services are provided to a client via an intermediary (like a limited company or personal service company).  If the individual supplying their services is, for all intents and purposes, an employee they will be caught by the IR35 rules and will be liable to pay the same tax and NICs as ordinary employees.

What are the key changes coming in April?

From 6^th April 2020, changes to the IR35 rules are coming into force, including:

• The entity paying the intermediary (the “Fee Payer”) will become responsible for paying the tax and NICs. Currently this responsibility rests with the intermediary;

• The client will become responsible for determining employment status via a Status Determination Statement (“SDS”). Currently responsibility for determining status rests with the intermediary;

• The client will need to pass on the SDS to the individual and the Fee Payer. If it fails to do this, the client will be responsible for tax and NICs.

For a more detailed overview of when IR35 applies and the process involved please see our factsheet on IR35 here.

So, what should organisations do now?                                                                 

Here’s our top 5 tips on what organisations should do now to help prepare…

1. Identify Supply Chains: Have a system in place to identify your contractual relationships with intermediaries. Ensure you understand the full supply chain and where you sit within this.
2. Review Current Systems and Processes: Ensure that you are able to make determinations on employment status. Even if you are not the end client, you will want this to enable you to challenge an assessment that you do not agree with.  You should also have a system in place for raising/dealing with enquiries/appeals on employment status.
3. Conduct Risk Assessments: Assess whether your arrangements are likely to fall within the IR35 rules. If they do, consider the risks in continuing or terminating these arrangements (including cost implications).  Consider whether any alternative arrangements would be preferable (e.g. use of an agency).
4. Draft/Update Relevant Documents: End clients will need a template SDS (others may want this also). You may also want to update your commercial contracts (particularly if you are now potentially responsible for tax/NICs which may impact your profit margins) and prepare template letters/policies for dealing with enquiries and appeals.
5. Train and Test: It’s sensible to train staff who will be dealing with these arrangements. This doesn’t need to be extensive; you just need to ensure that they understand the new rules and the processes in place. You should also ensure that you have a mechanism in place to test that your processes work efficiently.

This is an extremely complex area and our team are on hand to help with anything you need.  From providing advice on whether arrangements are caught by the IR35 rules to assisting in drafting the SDS and other documents that you may need.