Practical considerations of IR35
27th January 2021. Prepare for the new Off Payroll Working “IR35” Regulations before they start on 6th April 2021.
Unwrapping Off-Payroll Working / IR35
The changes from 6 April 2021 also bring new demands on public sector organisations too meaning all organisations should be undertaking some planning to prepare.
OPW has probably been better known as “IR35” in the UK. It is effectively new legislation which requires medium and large businesses to have controls in place to identify, assess and determine the employment status for income tax/NIC purposes of contractors engaged via an intermediary (i.e. typically a Personal Service Company or Partnership)
The April 2021 changes also provides new guidance for public sector bodies who have been required to abide by OPW legislation since April 2017.
In short, instead of the intermediary being responsible and ultimately culpable for any income tax or NIC liabilities should HMRC challenge the employment status of the engagement successfully (as is the case in the Private Sector up to April 2021 and was the case in the Public Sector up to April 2017), the new OPW regulations mean that the end client is responsible for determining the employment status of the engagement and deciding if income tax and NIC needs to be deducted via payroll. Where HMRC finds fault it will be able to challenge the end client for any liabilities, making the compliance process more transparent than has been the case historically, particularly in relation to who HMRC challenge.
For completeness, it does not impact on off payroll engagement that are direct with individuals. If HMRC successfully challenge this engagements, the income tax and NIC liability will already sit with the fee payer/end client.
From feedback, many organisations have not been clear in how to establish controls in managing this risk area given the complexities and variety of stakeholders involved. We have therefore been helping organisations get to grips with the practicalities and ensuring they can:
To help organisations, we have developed a technological solution to help manage the following:
This enables us to utilise our experience advising on employment status with technology that creates a clear, consistent and effective approach for all parties.
If you would like to know more about IR35, please contact us using the form below today.
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