IR35 in Accountancy
On April 6th 2020, the way in which you engage personal services companies will work completely differently.
The simple facts
To increase compliance with working rules – known as IR35, the responsibility of deciding if the off-payroll working rules apply will become your responsibility, not the individual providing the service.
The Government decided that if two workers were doing the same job – one as an employee and the other through their own company, they should pay the same income tax and national insurance contributions. Otherwise, the ‘employee equivalent’ would be costing the Government £1.6 billion a year by 2024.
This means that if you are a medium or large organisation outside of the public sector you need to decide if you should deduct income tax and NICs, and pay employer NICs.
As a simple guide you need to consider the following:
- What are the worker’s responsibilities?
- Who decides when, where and how do they work?
- Are workers free to pursue other work outside of your organisation?
- How they are paid?
- Are they in receipt of any benefit or expense?
IR 35 Next steps
The Check Employment Status (CEST) was introduced to help organisations determine if the off-payroll working rules apply. But according to HMRC, the tool arrives to a conclusion 85% of the time with 15% of cases requiring further investigation.
Recent UK tax tribunals which have arisen from the public sector – where the reform has already taken place, strongly suggest that using CEST and the simplified criteria above is not 100% effective in every case.
The new rules are confusing, and as an employer you need to take time to correctly identify each person’s status on a case by case basis. Otherwise you could be looking at facing a tribunal yourself and exposing your business to unnecessary risk.
In a recent interview with Accountancy Age, Blair Adams’ advice to businesses is to ‘start early and to focus on the relationships they have with contractors, which are through intermediaries because that is what is really being targeted by HMRC and this legislation.’ He says,
“The prudent ones are planning ahead already. So they’re analysing their contractual relationships, auditing them, trying to classify them and trying to do the early-stage determination to see who fits in where. Then the really active ones are then going a step further, and they’re talking to the ones who may fall on the wrong side of the line, to negotiate some new sort of arrangement.”
Feeling unprepared? Get help.
As with any reform, employers need support and guidance to implement these huge changes and ensure they are applying the rules correctly.
So, where do you begin? For many, professional help from an expert is the solution.
“Accountancy practice is changing all the time, and as the world of business evolves, firms need to be agile and able to adapt.
With this in mind, Public Practice Recruitment Ltd has developed a range of tailored recruitment solutions to suit your requirements.
Because we are experts in recruiting for accountancy firms, we are able to use our extensive knowledge to support employers with their HR strategy – potentially with a view to replacing contractors with employed professionals.
We’d love to collaborate with you on your recruitment strategy and ease the burden that the changes to IR35 are placing on your business. “
Garry Howling, Public Practice Recruitment Ltd
Take the first step in tacking the new changes to IR35 today.
Call 0333 577 7787