IR35 for Contractors

From April 2020, the responsibility for determining whether a contractor’s assignment is inside or outside of IR35 will pass to the end-client who receives the contractor’s services. The responsibility for deducting and paying tax from the contractor’s pay will also move to the party which pays the contractor’s limited company (usually, this will be an employment agency). Small client companies will be exempt from the legislation and the old rules will continue to apply.

For existing assignments if you are currently working via a PSC and your assignment continues beyond April 2020, the end-client will need to determine whether your assignment is inside or outside of IR35 prior to the changes taking effect. Some clients may outsource this obligation to the employment agency.

If the assignment (or payments made in relation to it) continue after April 2020 and the end-client decides that the assignment is inside IR35, you may be required to change the model through which they engage with you for the remainder of the assignment. For example, you may need to work via an umbrella or receive payments to your personal service company net of income tax and national insurance.

Essentially, if the end-client determines that your assignment is inside of IR35, the agency or hirer will be required to deduct income tax and national insurance from your pay and pay this to HMRC. If the end-client decides that your assignment is outside of IR35, you will be able to continue working through your personal service company and no tax deductions will be made by the agency/end client.

For assignments starting after April 2020, end-clients will need to specify whether an assignment is inside or outside of IR35 before you start work and we need to make the status (“Status Determination Statement”) of the assignment clear to you when discussing contracting opportunities. The draft legislation requires end-clients to provide a ‘status disagreement process’ for contractors to challenge their IR35 determination. If a contractor disagrees with the determination, they have the right to make representations to the end-client about why they believe the determination is incorrect and the end-client has 45 days to consider these and either change its determination or give its reasons for deciding that the original determination was correct.

Contract Review and Working Practices Questionnaire

If you are a contractor, caught by the changes in the Public Sector or worried about the changes coming to the Private Sector, we can discuss with you your working practices and contract, to help you understand your employment status for IR35 purposes.

The IR35 changes in the public sector were met with fear and confusion, causing some public sector hirers to take a negative and defensive approach to the new rules, in some instances introducing “blanket bans” upon the use of limited company contractors.  WTT Legal is working with a large number of private sector agencies and hirers to ensure that the private sector takes a more measured, rational and commercial approach, whilst of course complying with the law.

The IR35 changes in the Private Sector are not something to be feared and, if you work in a self-employed manner, you will be able to continue to do so after the rules change. Furthermore, if your working practices and contract mean that you are on the borderline of being inside or outside of IR35, we can work with your agencies and hirers to find ways in which these can be changed to keep you outside of IR35.

Our assessment tool uses 95 questions to build a comprehensive understanding of your relationship with the client.

An IR35 lawyer will then:

  • review your answers in conjunction with your contract.
  • make recommendations for amendments to either the contract or your working practices.
  • discuss alternative models of working where appropriate.

How can WTT help you achieve this?

Our Legal team is led by Carla Roberts who has more than 20 years experience in this field and was previously Head of Legal for a major UK agency.

It is this experience that is brought to bear when comprehensively reviewing your next contract for IR35 status.  Through review and discussion, we can give you an opinion on whether we believe your engagement to be inside or outside IR35, together with a report on the contract clauses that expose you to risk.

Where our opinion is contrary to that of the engager, we can open discussions with them to understand their concerns and either give the reassurance through our vast experience or discuss changes to the contract that are agreeable to both parties which would remove the risk.

That contract would then be monitored on an ongoing basis for full compliance ensuring all parties do not unnecessarily expose themselves to unwanted tax liabilities.

Status Determination (“SDS”) and Confirmation of Working Arrangements

All contractors who complete and submit the working practices and contract review will have access to a comprehensive Status Determination Statement containing detailed reasons for the assessment determination. Where the determination finds that “IR35 does not apply” those contractors will also receive a Confirmation of Working Arrangements to be signed by the client, which can be used to demonstrate due diligence and strengthen any future IR35 defence.

Statement of Work (“SOW”) and Consultancy

Establishing your own consultancy

WTT can conduct an assessment of your working practices to determine whether this model is a viable and compliant alternative for you. If you qualify as a small company, the new legislation will not apply and the IR35 status of any consultants you engage will need to be determined by them. If this is determined to be an appropriate model for you, we can assist you with establishing a framework within which to operate: (accounts/engagement with clients – engagement between consultants -articles of association – company registration) followed by an IR35 determining framework.

Our “consultancy package” includes contract templates for engaging with agencies and/or clients directly and contracts for any consultants or employees you engage through your consultancy. Our ongoing support includes bookkeeping -company accounts – and Status Determination Statements for your consultants. Finally, a legal helpline is available for any issues that may arise.

Working on a SOW basis

If you wish to continue using your PSC as the sole director/employee – but engage with clients on an outcome-based SOW instead, WTT can conduct an assessment of your working practices. This will determine whether a transition to working on a SOW basis is appropriate.. We will discuss with you the risks/opportunities of this model.

Contract Amendments / Negotiation with Agencies / End-Hirer

We can assist you with contact amendments and negotiating any changes with the agency or end hirer.

Umbrella

Should a role be deemed inside IR35, or you prefer to move to an umbrella indefinitely or on a short term basis, we can refer you to a fully-compliant umbrella employment solution. For further information, please contact chris.mattingly@contractor.coop

Arrange a Callback

Our team of experts are on hand to answer any questions you have. To see if we can help give us a call or enter your contact details below and we’ll be in touch within 24 hours.

Graham and Rhys have been beyond helpful and always have wise words, and most importantly they tell it straight.  I’d much rather have the truth even if its not good news than empty hope – and WTT have always given just that, straight talking and the truth.

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