Off Payroll Working (IR35) rules
What are they?
The Chancellor announced in the October 2018 Budget that the government intends to reform the off payroll working rules (known as IR35) in the private sector. This follows consultation and the roll out of the reform in the public sector.
The responsibility for operating the IR35 working rules will move from the individual contractor to the organisation, recruitment business or other third party contracting with and paying the contractor (the fee payer).
Who do they apply to?
From 6 April 2020 if you are a contractor working in the private sector, and you provide your services through an intermediary (personal service company) you may have to self-assess to be able to continue to work outside of the IR35 rules.
What is changing?
From the 6th April 2020 responsibility for operating the off payroll working rules will move from individual contractors to the organisation, recruitment firm or other third party engaging the contractor. And along with this, responsibility for tax and NI deductions will be levied at the fee payer (client or recruitment company) who holds the contract with the contractor, rather than the contractor themselves. If the off-payroll proposals are legislated in their current form, should HMRC disagree with the determination made, it can investigate and insist on back payment of tax as well as penalties for late payment.
This means that clients may be unwilling to take the risk of allowing contractors to continue to work outside of the IR35 rules.
Clients may take steps to move contractors onto a PAYE status, or ask them to work inside of the regulations to mitigate the risk.
Grafton Banks Finance is providing a solution for eligible contractors to continue to work outside of IR35.
What are we doing?
Grafton Banks Finance is taking a pragmatic view to the IR35 rules. Our primary duty is to our candidates and clients and ensuring all parties can continue to work within the relevant tax legislation without penalty.
To ensure a seamless transition when the rules do change in April 2020, and importantly to protect all parties, we have partnered with Parasol Umbrella Company (Parasol) to manage our contractors. Parasol offers a range of employment solutions, including the Qdos Contractor assessment tool (Qdos).
Qdos offers specialist services relating to the IR35 rules. They provide solutions and consultancy services for contractors working outside of IR35, recruitment agencies and liable* UK business which engage a self employed work force.
Through Qdos Grafton Banks Finance offers contractors the ability to assess their eligibility to work outside of IR35.
At the point of registration, any roles deemed outside of IR35 will be run through the Qdos tool, to establish if the role can be offered outside of IR35.
If the Qdos assessment states that a role falls outside of IR35, we can then open this up to eligible contractors who believe that their work status allows them to work outside of the IR35 rules.
Part of the new onboarding process for roles outside of IR35 will also involve candidates running an assessment through the Qdos system. There will be a charge to contractors for use of the Qdos tool.
Assignments ‘outside of IR35’
When Qdos makes the status determination that the assignment is outside of IR35 it fulfils the guidance of reasonable care stated by HMRC. In addition, if HMRC successfully challenge a Qdos decision and tax/NI liability/late payment penalties fall due, the loss is insured by Qdos.
Grafton Banks Finance can then open the vacancy outside of IR35 and prior to starting the role, the successful candidate will also be required to self-assess through Qdos.
Assignments ‘inside of IR35’
If the assignment is found to be inside of IR35 Grafton Banks Finance can offer a range of alternatives to the off-payroll method.
- PAYE payroll (agency workers) the assignment is run through Grafton Banks Finance’s payroll. Tax and NI are deducted at source. The recruitment business contracts directly with the worker under agency rules and provides the worker with rights.
- Umbrella Company – where an umbrella company employs the worker directly; the off payroll IR35 rules do not apply. We have partnered with Parasol to offer a recognised and reputable umbrella company solution to our contractors.
To fully explain the way in which Qdos works, please follow this link.
* Small Company Exemption
The new IR35 rules will only affect medium and large private sector organisations. The responsibility for making status determination for clients classed as a ‘small’ business remains with the Personal Service Company (PSC) . Under Section 382 of Companies Act 2006 a client qualifies as ‘small’ if two of the following conditions apply:
The new IR35 rules will only affect medium and large private sector organisations. The responsibility for making status determination for clients classed as a ‘small’ business remains with the Personal Service Company (PSC) .
Under Section 382 of Companies Act 2006 a client qualifies as ‘small’ if two of the following conditions apply: