{"id":15047,"date":"2021-01-06T00:00:00","date_gmt":"2021-01-06T00:00:00","guid":{"rendered":"https:\/\/identifi-global.eu.applyflow.com\/are-your-contractors-inside-or-outside-ir35\/"},"modified":"2022-12-09T06:15:01","modified_gmt":"2022-12-09T06:15:01","slug":"are-your-contractors-inside-or-outside-ir35","status":"publish","type":"post","link":"https:\/\/www.identifiglobal.com\/news\/are-your-contractors-inside-or-outside-ir35\/","title":{"rendered":"Are your contractors inside or outside IR35?"},"content":{"rendered":"

\n\t\"\"<\/p>\n

\n\tIt\u2019s nearly time. In April 2021, the new IR35 rules come into force for the private sector \u2013 rules that are already in place for the public sector. Are you ready for these changes?<\/span><\/p>\n

\n\tIf your company works with contract staff, the new IR35 reform could well be a problem. You\u2019ll need to establish whether the rules apply \u2013 both to existing and to future contractors \u2013 so that neither you nor your contractors are accused of tax avoidance. As the hiring company, you will be responsible for determining whether a contractor falls within IR35 rules.<\/span><\/p>\n

\n

\n\t\tAre you ready for IR35?<\/span> Let us know if there\u2019s anything we can do to help<\/a>.<\/strong><\/em><\/p>\n<\/blockquote>\n

\n\tHere, we lay out what \u2018inside IR35\u2019 and \u2018outside IR35\u2019 actually mean, how to check a contractor\u2019s IR35 status, and what you\u2019ll need to do before April.<\/span><\/p>\n

\n\tWhat does it mean to be \u2018inside IR35\u2019 or \u2018outside IR35\u2019?<\/span><\/h2>\n

\n\tPut simply, IR35 legislation applies if an individual you have hired as a contractor would actually be an employee \u2018if there was no intermediary\u2019. By \u2018intermediary\u2019, HMRC are referring to someone who is avoiding paying an employee\u2019s income tax and National Insurance Contributions that they would be paying if hired directly. These tax benefits come through working through a personal service company (PSC) \u2013 working through a limited company instead of being added to PAYE.<\/span><\/p>\n

\n\tInside IR35 – \u2018deemed employment\u2019<\/span><\/h3>\n

\n\tUnder the new intermediaries legislation, contractors who fall inside IR35 will be \u2018deemed employees\u2019 of the end client. As such, any tax efficiency from contracting will be lost, as they will be regarded as subject to PAYE.<\/span><\/p>\n

\n\t“A<\/span> \u2018deemed payment\u2019 will need to be made to HMRC.”<\/h4>\n

\n\tIn cases where a contractor is inside IR35, a \u2018deemed payment\u2019 will need to be made to HMRC at the end of the tax year. Alternatively, the contractor will need to organise a contract review prior to the new rules coming in, to avoid IR35 applying.<\/span><\/p>\n

\n\t\"\"<\/p>\n

\n\tOutside IR35<\/span><\/h3>\n

\n\tTo be considered as operating outside of IR35 rules means that a contractor works as a genuine contracted business to a client in the private sector, rather than acting as an employee. However, even if a contractor has determined that they are outside of IR35, they can still be subject to checks from HMRC.<\/span><\/p>\n

\n\tHow to check if your contractors are inside IR35<\/span><\/h3>\n

\n\tWhile many recommend using the government\u2019s<\/span> CEST (Check Employment Status for Tax) tool<\/a>, we would advise against it. This tool has proved to be incredibly basic \u2013 and, in some legal cases in the public sector, has been found by HMRC to have wrongly determined a contractor\u2019s IR35 status.<\/p>\n

\n

\n\t\tFor a detailed review of IR35 for employers, download our new guide<\/a>.<\/span><\/strong><\/em><\/p>\n<\/blockquote>\n

\n\tInstead, a business should establish the following:<\/span><\/p>\n