If you either work as an Contractor (weather you work in IT, Health, Oil & Gas, Legal etc) or hirer you should be aware and looking to implement measures about the IR35 rule which will be extended to the private sector from April 2020.
It is already apparent that thousands of contractors have been wrongly placed inside IR35 by public sector engagers as a direct result of reform in 2017 which has led many consultants to question whether the private sector will be in a position to administer IR35 accurately next year. All industry sectors rely on the flexibility of the independent workforce, and the recruitment industry depends on contractor hires.
Understandably many Contractors will have concerns in the private sector’s ability to handle the IR35 tax reforms as they are required to self-declare whether their work falls within the IR35 framework, and therefore taxed in the same way as full-time employees.
The April 2020 reforms will mean that private sector organisations will be responsible for managing IR35 status, as “the Hirers”, along with the agency or umbrella company, (if involved in the supply chain), as the “Fee Payer”. Managing IR35 status will require an assessment to determine whether each contractor should be inside or outside of IR35. If inside IR35 the contractor will be subject to the same tax and NI payments as full-time employees.
HMRC has engineered its CEST (Check Employment Status for Tax) tool to only pass contractors in cases of absolute certainty. This means that if you don’t provide specific answers to particular questions, you won’t pass HMRC’s test. HMRC’s CEST questionnaire consists of four sections, covering two of IR35’s primary factors, and two secondary factors:
- Personal service
- Control
- Financial risk
- Part and parcel
The user is guided through these sections sequentially. If HMRC decides that they strongly pass either section one, two or three, it will skip the remainder of the questions and the user will be told that they are outside IR35. For more information about the tool and guideline check out https://www.contractorcalculator.co.uk/how_ir35_pass_hmrc_status_tool.aspx.
SMCC work with legal specialists and industry bodies in order to provide contractor solutions and advice to Hirers and Contractors to ensure legal obligations are met and that the most appropriate processes, systems and contracts are place for your needs.
If you need a contractor staffing specialist which understands IR35 contact SMCC by calling 01277 211151 or info@smcc.uk.com
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