The much-debated changes to off-payroll in the private sector (IR35) are coming into effect in April 2021 – a year later than initially planned due to the coronavirus. As a result, private sector organisations should already have reliable procedures to ensure each member of their temporary workforce receives a fair IR35 status assessment. This article will set out to answer the question – what should private sector organisations already have done to prepare for changes to off-payroll legislation (IR35)?
Understand the legislation and how it’ll impact the entire supply chain
From 6th April 2021, contractors working through a personal service company (PSC) will no longer be responsible for determining their IR35 status. Instead, the private sector end-client (providing they’re a medium or large business*) will be accountable for making IR35 assessments. Similar legislation was introduced into the public sector in 2017 (off-payroll in the public sector).
Off-payroll in the private sector (IR35) changes are already having a significant impact on the entire supply chain of temporary workers. This is because the legislation will impact live assignments that run beyond 6th April 2021. Therefore, it’s vital that every organisation engaging with temporary workers understands the legislation and how it’ll affect every party in the supply chain.
Within the supply chain, it is the temporary workers’ “fee payer” who must deduct tax and National Insurance at source – assuming the worker is deemed inside IR35. Therefore, if an agency is involved, end-clients should be working closely with them to ensure correct information is handed down, and both parties are handling payments compliantly.
Assess every temporary assignment – in depth
By now, private sector organisations with temporary staff should already know the IR35 status of each individual role. And if any new roles are introduced, the IR35 status of that particular assignment should be determined before advertising the position.
If the end-client considers a position to be inside IR35 (that was perhaps not previously considered inside by the worker), they may well decide to offer contractors an uplifted rate – if they are to take it on. By doing this, limited company contractors will not face a reduction in take home pay when working through an umbrella company, or receiving PAYE elsewhere (potentially via their agency).
Have procedures in place that ensures Status Determination Statements (SDS) are accurate
Following on from the point above, it is the end-client’s responsibility to ensure that each contract role is accurately assessed regarding IR35. Each temporary worker must be given an official Status Determination Statement (SDS) – a document that explains whether the role is inside or outside IR35, with justification. The official government website states that hirers must take “reasonable care” when producing SDS’s.
Engage with IR35 specialists and third-parties with expert knowledge on the legislation
IR35 is complex, and there is no shame in any organisation seeking external assistance with making lawful IR35 assessments.
Firstly, the government has created a status determination tool – CEST (Check employment status for tax). It’s a great tool to start making IR35 assessments with, but it has come under a lot of scrutiny, and multiple stakeholders have questioned its accuracy. Therefore, a better route to making dependable IR35 assessments may lie elsewhere.
Since IR35 was introduced in 2000, many specialist tax-status lawyers have built stellar reputations within the industry. These businesses are ready to work hand-in-hand with private sector organisations and can:
- Help make accurate IR35 assessments.
- Provide training to staff at the end-client.
- Make reasonable adjustments to existing ‘inside IR35’ contracts – so they legitimately fall ‘outside IR35’ moving forward.
- Put procedures in place to protect workers affected by IR35.
- Communicate with every party within the supply chain, to ensure they are all on the same page.
- Offer direct assistance to contractors who may have questions about IR35.
Help contractors who want to question a Status Determination Statement (SDS)
Suppose a contractor wants to appeal against a Status Determination Statement (SDS). In that case, it is the end-client’s responsibility to have procedures in place to ensure the contractor is listened to and treated fairly. The end-client must make a formal response to a contractor’s appeal within 45 days, and state whether the SDS is fair, needs amending, or if a new one needs creating.
If you are a hirer of temporary workers in the private sector and you’re concerned about the upcoming changes to off-payroll in the private sector, Churchill Knight would be happy to provide you with assistance. We’ve been providing specialist contractor accountancy for over 20 years, and we’ve always made it our priority to be up to date with the latest legislation. We’ve also partnered with some of the most respected organisations in the contractor payroll and insurance sector – so we can offer unrivalled support.
Due to the changes to off-payroll in the public sector (2017) – we launched Churchill Knight Umbrella – a compliant and efficient umbrella company to help contractors that fell within IR35. Therefore, we’re the perfect accountancy and umbrella company to partner with because we offer all the compliant payroll services that private sector contractors might need – whether inside or outside IR35.
To find out more information about partnering with Churchill Knight, or if you would like to discuss the upcoming changes in legislation, please give us a call on 01707 871622.
Support for Churchill Knight clients working in the private sector
Account Manager for unlimited support
Your Account Manager is on hand to answer any questions you have about the upcoming changes in legislation, and to discuss your circumstances if you’re unsure what your best course of action is. You may decide that it’ll be beneficial for your Account Manager to contact your end-client on your behalf – and this is something they’d be delighted to arrange. Please give them an email or call at your earliest convenience.
PAYE umbrella – if you need it
Churchill Knight sincerely hopes that all of our limited company clients can continue to work outside IR35 in the private sector. However, if you find that you require an umbrella company’s services at any point, please do not hesitate to contact your Account Manager. Switching between your limited company and our umbrella payroll is remarkably easy and cost-effective, and we’re here to support you through every step of your contracting journey.
From April, it will be the responsibly of your end-client to determine your IR35 status. Providing your client takes this responsibility seriously and has reliable procedures in place; you have absolutely nothing to worry about. However, if you are interested in having an independent specialist review your contracts, we would be delighted to put you in contact with our IR35 partners – Kingsbridge.
Every Churchill Knight client is eligible for special discounts when you use any of Kingsbridge’s IR35 services, and taking advantage of this offer may give you the peace of mind you need to move forward with your contracting career. Kingsbridge also offers a market-leading, Zurich underwritten IR35 insurance policy that protects the whole supply chain for up to £100k legal defence costs and £100k tax liability, as well as providing a legal expenses policy. This will cover you if HMRC investigates your client and decides you have been wrongly assessed and have an outstanding tax liability.
For more information about IR35 assessments and IR35 protection insurance, please contact your Account Manager.
* There is a small business exception. If two of the following applies to a private sector organisation, their contract workers can continue to determine their IR35 status – turnover (annual) below £10.2 million, the total sum of balance sheet is not higher than £5.1 million, the company has under 50 employees.
Founded by an IT Contractor in 1998, Churchill Knight has become one of the most respected contractor accountants in the UK. We’ve helped over 20,000 contractors with their accountancy requirements. As well as our accountancy services, we also have an industry-leading PAYE umbrella company and dedicated in-house personal tax department. Whichever service you choose, you can move forward with complete peace of mind. We are proud of the reputation we’ve built over the years, and our FCSA accreditation proves how committed we are to compliance within our sector. Keep reading…