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New legislation for limited company contractors, IR35 launches 6th April 2020
April 6th 2020 will see a new legislation come into effect that will focus on the status of Limited Company workers.
If you are a business that hires people either directly or via an agency that are operating as a Limited Company you will need to assess whether they will be operating “inside IR35” or “outside IR35”. Whether you assess them to be inside or outside this information will need to be relayed to the consultancy you are dealing with or if a direct hire to the person operating on this basis. Amongst some of the questions that you will to ask to determine whether they are “inside” or “outside”:
- Does the contractor have right to provide a substitute worker to perform the duties?
- Does the contractor fall under the direct control of the company – are you dictating what and how work is carried out?
- Will you be providing consistent and paid work – is the contractor obliged to accept this work?
- Is the contractor able to work with other clients?
- Will you provide equipment for the contractor to use? E.g. laptop, mobile phone?
- Would the contractor be seen to be part of your business? – would they be integrated into your current business and teams? (This could mean joining in or being invited to social events the company hosts, Christmas parties etc.)
- Would the contractors have their own ID Badge?
- Would the contractors have their own email with a business email address?
- Would the contractor be entitled to benefits such as holiday or sick pay?
As a contractor you need to be aware of how the business has interpreted the role as this legislation has been designed specifically to close a loophole in the tax system where workers could use the setup of a limited company structure in order to pay less tax. The impact to you as a Limited Company contractor if the role is deemed to be “inside” IR35 is extremely likely to impact your tax liability so it is imperative that you know whether you the role is deemed to fall “inside” or “outside” of the new legislation. Much discussion has been had on this legislation and although April may seem to be a while away it will be here before we know it, so if your current contract is confirmed to finish beyond 6th April 2020 or likely to be extended to beyond this date then you will need to start investigating what your agency and client are doing to determine the status of the role allowing you to be prepared for the change and decide whether to change your current operating process.
There are lots of websites and information is available at HMRC https://www.gov.uk/guidance/understanding-off-payroll-working-ir35. If you would like to have a discussion about this could impact you as a business or as a contractor then please feel free to get in touch.
Blog written by Caterina Glenn, Senior Recruitment Manager - Finance Division.