What is IR 35?
IR 35 is the rule that ensures those who work and enjoy the benefits as employees are taxed as employees.
Having a person as a subcontractor rather than employee has obvious benefits but the main point being not having to pay Employer’s National Insurance.
In April 2017 HMRC introduced the new rules to Public sector organisations. From April 2019 (at the earliest) these rules will apply to private sector companies.
The previous responsibility of whether a worker was a subcontractor or employee was placed on the worker themselves. The changes in 2017 moved this responsibility to the organisation. The biggest case so far relating to these changes has been the BBC with presenters being told to setup services companies. HMRC has since challenged this and sent increased tax bills to the presenters to cover the loss in tax if they had been employed. Many of the presenters have since been employed by the BBC.
HMRC investigations are complex and time consuming when looking into IR 35 cases. Many are taking 18 months or longer to complete often ending up at a tribunals.
What can you do?
With this in mind getting the IR 35 decision right from the start is becoming a must. HMRC released a Toolkit relating called CEST. This is a great place to start when determining the status of a worker.
However with most things involving HMRC the CEST Toolkit is not 100% accurate and HMRC have been challenging organisations on the results. Therefore if you do have workers that may fall into the IR 35 rule do get in touch and we will be able to assist with the decision process.
As always if you have any questions about the above information please do let us know on 01480 300945.
Richard at TG