10 Mar 2020

IR35 comes into force in April

IR35 Article 120323057 1

The IR35 tax legislation change in April 2020 will impact on any business which is defined as being “not small”. The definition of a small company is given in the Companies Act; in short if you’re required to have an audit then this legislation will apply to you. For groups the position is a bit more complicated, so if you’re a member of a group you will need this to be looked into in a bit more detail.

For unincorporated businesses, such as a partnership, the definition is straightforward; if your turnover is above £10.2m in a calendar year then you’re not small.

From April onwards, you will have to determine the employment status of anyone that provides services to your business, even if they are self-employed or work for an agency. You must review the employment status of every worker who isn’t on your payroll unless they only receive money under another entity’s payroll, such as an “umbrella company”.

If you use an agency for your workers, you might not know if those workers have their own limited companies, or are paid through an umbrella company. You will need to find out as you’ll still be subject to the legislation.

If you deem workers to be employees, they will need PAYE and employee’s NI deducted from monies paid to them, and you will have to pay employer’s NI. In addition, the worker is likely to be unhappy with that decision due to the additional taxes, and they may seek to increase their rates, or seek work elsewhere.

If you decide that a worker isn’t an employee then, should HMRC disagree at a later date, you will be responsible for paying over all the PAYE and NI that should have been deducted at the outset, together with interest and probable penalties.

It isn’t, therefore, a decision to be taken lightly.

Please contact Sam Dale to discuss this further.