iTax Solutions

IR35 on private sector

History:

HMRC introduced IR35 rule in April 2000 to prevent workers to work under disguised employment status (commonly through Ltd Company) which results in reduced income tax and no national insurance contribution. It was the worker who was responsible to determine their employment status and pay all taxes. From April 2017 this responsibility has diverted to public sector employers to determine worker’s employment status and deduct the right amount of tax and NIC.

Recent development:

This new IR35 rule is going to be extended to private sectors from April 2020. Currently it is in consultation level. This issue is quite relevant to IT contractors or locum pharmacists. It is conceived that employers may take the safest approach and apply IR35 to off payroll workers or employ them under PAYE. If off payroll workers falls under IR35, the employers also have to pay secondary class 1 NIC which may prompt them to reduce the rate they pay otherwise. So far the plan is to apply the same rule that is applicable for public sector.

The following HMRC link will give some guidance about how is it going to work

https://www.gov.uk/government/publications/off-payroll-working-in-the-public-sector-reform-of-the-intermediaries-legislation-technical-note/off-payroll-working-in-the-public-sector-reform-of-the-intermediaries-legislation-information-for-agents

Are you covered:

There are some tests which may indicate whether a worker is employed or self-employed. The major tastes are:

–        Can the worker employ someone else to do the work on their behalf for the end client?

–        Can the worker decide how the work is done?

–        Can the worker decide their working hour?

–        Can the worker decide where the work is performed?

–        Is the worker using their own equipment (i.e. laptop/computer etc.) to perform their duties?

–        If the work delivered is not satisfactory, does the worker fix it at their own cost?

If the answers to the above are yes, then you are pretty much covered and no need to worry about IR35.

Follow the HMRC link below to check your status  

https://www.tax.service.gov.uk/check-employment-status-for-tax/setup

If you have further queries, please contact us.