What is IR35?
First introduced in 2000, IR35 was designed to reduce tax avoidance by contractors who HMRC believe to be “disguised employees” – people who work in a similar way to full-time employees but charge for their services using their limited companies to make their business as tax efficient as possible.
Changes due in April 2021
Currently, an individual working through their own limited company is responsible for determining their IR35 status on each contract they undertake and make deductions for tax and national insurance contributions in accordance with their IR35 status.
As we know, the government intend to change the way IR35 status is determined going forward. The determination of IR35 status will become the responsibility of the end client/hirer and should be passed down through the supply chain (if a fee payer is in place – generally a recruitment agency) to the contractor. Tax liability will sit with the “fee payer” who must deduct tax and national insurance contributions and report using Real Time Information (RTI).
If your organisation engages with limited company contractors, these changes will impact you.
Understanding IR35 and the ramifications it will have on your business can be daunting, however your organisation does not want to be liable for owed taxes estimated by HMRC to reach 1.2 billion by 2023 not to mention the possible risk to reputation for non-compliance.
Interested to read or listen to our take on IR35 and advice that may help you and your business by April 2021?
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At Optimus Shield, we have invested heavily into research and development supported by tax and legal opinion to provide a product that not only assesses IR35 status of a contract but can facilitate an end to end process for the supply chain.
“Delivering Prime Protection”
Optimus Shield’s unique tool allows you to:
Each contract is individually assessed along with the working practices using our unique status determination tool to identify IR35 status.
Once assessment is completed a status determination statement (SDS) is issued to all parties in the supply chain.
Upon determination of the status, Optimus Shield can facilitate a fee payer service for both outside and inside IR35 situations.
Our fee payer service takes on the liability for making PAYE deductions, reporting to HMRC using Real Time Information (RTI) and sending payments to HMRC.
Our outsourcing partnering service enables Optimus Shield to take on both the responsibility for making the IR35 determination and tax liability. Optimus Shield will make the relevant deductions based on the assessment and both report to HMRC via RTI and send payments to HMRC.
Optimus Shield is the result of heavily invested research and development to tackle the issues now facing the private sector due to changes to the IR35 legislation being rolled out in April 2021.