Harvey Nash IR35 Update – For Companies

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Posting date: 06 December 2019

Our latest update on IR35

At first glance, introducing the practices and processes to deliver a smooth transition to the revised IR35 may seem a difficult and daunting task. With effective planning, however, the revised IR35 to the Private Sector may bring with it ample opportunities for your business, from better contractor engagement models to resource management.

From our experience, there are measures every business can take to prepare for the extension of IR35 to the private sector in April 2020.

While the cancellation of the Autumn statement and the impending General Election have kept us in a state of wait, at Harvey Nash our position is that businesses and contractors must assume the revised IR35 will come into effect in April 2020, and begin preparations, if they have not already done so.

The revised IR35’s introduction to the public sector in 2017 taught us a lot, and we are applying those lessons to support our clients and contractors now.

Please be assured that we are and working very hard to engage with all contractors and clients, providing them with the most up-to-date information surrounding IR35, to ensure we all successfully navigate the forthcoming changes.

This factsheet offers a concise overview of the facts surrounding the revised IR35, based on the most current information available, along with useful resources to help clients in making informed decisions.

Background

  • With the exception of placements in the Public Sector, it has been the responsibility of each contractor or their Personal Service Company (PSC) to decide their own tax status in relation to IR35.
  • The new “off-payroll working in the private sector” places responsibility for deciding if the IR35 rules apply on the end user (the “Client”) where the PSC is on assignment.
  • The Client must therefore inform Harvey Nash if each engagement is “inside” or “outside” of IR35 ensuring that it takes ‘reasonable care’ when doing so.
  • HMRC recently released an updated version of its electronic tool to conduct a test to support decisions - click here to find out more.
  • Details regarding the rules and changes can be found at https://www.gov.uk/topic/business-tax/ir35.
  • HMRC state in their latest factsheet ‘We estimate that two thirds of people working through a company are genuinely self-employed and not affected by these rules

What does this mean for Clients?

Clients should begin to consider the status of their current engagements. If the contractor is unable to provide a substitute, does not have autonomy over the delivery of the services, does not take financial risk or is subject the supervision, direction or control of the Client, then it likely that the role would be considered as inside IR35 for tax purposes and fall within the IR35 rules. For the avoidance of doubt the above is not exhaustive and only some of the examples of employment status, other criteria may/will be taken into consideration. Please visit the HMRC website via the link provided above.

Clients must ensure that they are fully compliant with the updated rules and look to assess the role of every contractor to understand the nature of the role and determine if it will be considered as ‘inside IR35’ or ‘outside IR35’. The Client must ensure that assessments are consistent and transparent and ensure that reasonable care is taken when determining the IR35 status for a role. The Client has an obligation to share its findings with Harvey Nash and the applicable contractor.

Determinations may impact the way that a contractor is engaged by Harvey Nash and the obligations of Harvey Nash as the ‘Fee Payer’ may change so it is imperative that the Client assesses its contract roles as soon as possible.

Summary

The government’s response to comments on the draft legislation for the off-payroll rules coming into force on 6 April 2020 has been put on hold. The Budget has been cancelled, as have all the bills before it, including the Finance Bill, however, we have no option but to carry on preparing for the new rules based on the information that we have been provided with to date.

Harvey Nash will be working with Clients to confirm their approach for these changes and the likely determinations for each placement so that Harvey Nash can ensure transparent communications with contractors, ensure full compliance with its obligations as the ‘Fee Payer’ and perform necessary administrative tasks prior to the April 2020.

These changes will not affect any contractors currently supplying services on a PAYE basis or via an umbrella company.

If you have any questions relating to your obligations under the revised IR35 changes, please get in touch with your Harvey Nash representative.

If you have any questions relating to the revised IR35 changes, please get in touch with your HN representative or contact our compliance team – compliance@harveynash.com.

If you require any further information please contact us at https://www.harveynash.co.uk/general-query-form.