If you’re a contractor, you’ve probably heard of IR35, but you may not be completely clear on how it may impact you. We’ve put together a short overview for you to help you get your head around it all.
We do need to caveat the full impact of IR35 isn’t completely clear as the draft legislation only came out last month and the final draft is not due until later in the year. As such, this information should be only be considered a guide.
What is IR35?
IR35 is a piece of legislation that was introduced in 2000 designed to make sure everyone is paying the correct tax and NI.
It is basically a series of tests that aim to find out if someone is genuinely running a business, or is a “disguised employee” working through a PSC (Limited Company).
A “disguised employee” is someone, who if they were not engaged with a client via their PSC, they would otherwise be employed by the client and paying employee tax and NI.
What changes are coming into effect?
Currently, determining whether an assignment is inside or outside IR35 sits with the contractor but this will be changing, and the determination will sit with the client as of April 2020. These changes have already come into effect in the public sector.
How to determine if your assignment falls inside or outside IR35?
There are a number of factors that are assessed to paint an overall picture of your employment status, and therefore whether an assignment is caught by IR35 or not.
- Do you have the right of substitution? Can you substitute your services for someone who is also qualified to complete the assignment?
- Do you have control and direction of the assignment? Are you able to decide where, when and how you work, or are you under the direct control of the client?
- Are you providing equipment? Are you using your own equipment or is this provided by the client?
- Are you embedded in company life? Do you have access to staff facilities, staff social events or receive staff benefits?
- Are you running a business? Is your PSC registered for VAT, have you got the relevant business insurances, including business public liability and professional indemnity insurance in place. Do you have dedicated office space in which you have carried out contract-related work?
We’ve been following developments closely, and have taken advice from trusted sources like APSCo and Paystream around this legislation, which is currently in draft stages. We’ll do our best to keep this blog as up to date as possible, but even in the public sector, the rules are not completely clear cut, so we recommend you seek independent legal advice if you need to.
We have invited Paystream and Kingsbridge Insurance to Futureheads HQ on the 18th September to talk about IR35 and Insurance in detail. Find out more and RSVP here.
If you have any questions, get in touch at email@example.com.