Does your payroll include self-employed workers, contractors or consultants? A small piece of legislation is set to have a large impact on businesses. Understanding your IR35 status may save you from back paying unpaid tax.
From the 6th April, 2021, all public authorities and medium to large sized businesses will be responsible for deciding the employment status of workers. Failure to comply could result in hefty workers tax and National Insurance shortfalls becoming the employer’s responsibility. Worst-case scenario could even mean a possible prison sentence.
Ensuring your IR35 compliance doesn’t have to be a prison sentence, let us show you how.
What is IR35?
The update of existing IR35 laws, introduced in 2000, was to address ‘disguised employment’. This piece of legislation ensures that contractors not meeting HMRC’s definition of ‘self-employed’ are prevented from benefiting from tax breaks that are associated with contracting.
Who is affected?
All public sector clients and private sector companies that meet two or more of the following conditions:
- An annual turnover of more than £10.2 million
- A balance sheet total of more than £5.4 million
- More than 50 employees
Still unsure if this applies to you?
The HMRC offers a CEST (Complete Employment Status for Tax) assessment for the businesses self-employed workers. If your business does not meet two or more of the above criteria, you can instruct your self-employed worker to take the assessment and provide the result thereof.
What you need to do
You will need to decide the employment status of your workers. You must do this for every contract entered into, agency or self-employed worker.
You’ll need to:
- pass your determination and the reasons for the determination to the worker and the person or organisation you contract with.
- make sure you keep detailed records of your employment status determinations, including the reasons for the determination and fees paid.
- have processes in place to deal with any disagreements that arise from your determination.
If you are also the fee-payer and the off-payroll working rules apply, you will need to deduct and pay tax and National Insurance contributions to HMRC.
Small-sized clients in the private sector will not have to decide the employment status of their workers. This will remain the responsibility of the worker’s intermediary.
If you have any questions or concerns about your IR35 status then please do connect with us on 01252 863700 or email info@epayme.co.uk. ePayMe are one of the UK’s leading providers of compliant payroll and accountancy services to contractors, temporary agencies and small businesses. Our bespoke systems utilise the latest software and link directly to HM Revenue & Customs using RTI (Real Time Information) system, ensuring that pay calculations are always based on the correct tax code.