IR35 STATUS DETERMINATION, COMPLIANCE WITH THE ABILITY TO MITIGATE RISK
The IR35 changes due to be implemented in April 2021 are estimated to impact over 900,000 UK based limited company contractors working in the private sector. The first step to complying with new IR35 legislation is to understand what exactly is changing and how it will affect your business.
What Is IR35 Legislation?
First introduced in 2000, IR35 aimed to reduce tax avoidance by contractors who HMRC believe to be “disguised employees”. Essentially, this was aimed at 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.
Since IR35 legislation came into place, an individual working through their own limited company has been responsible for determining their IR35 status on each contract they undertake. They also have the responsibility of making deductions for tax and national insurance contributions in accordance with their IR35 status.
However, under new IR35 legislation, this is all set to change.
What are the IR35 changes?
From April 2021, legislation is changing. IR35 status determination 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 then sit with the “fee payer” who must deduct tax and national insurance contributions and report using Real Time Information (RTI).
HMRC are set to profit 1.2 billion by 2023 from IR35 changes.
How much of this will come from your business?
How will IR35 changes affect businesses?
It is estimated that IR35 changes will impact over 900,000 UK based limited company contractors working in the private sector.
Meanwhile, businesses will spend tens of thousands simply preparing for IR35 changes, not to mention the extra time and resources that must be attributed to the legislation changes.
There are also increasing cases of businesses losing their top talent as IR35 changes loom closer. This is largely due to either blanket approaches or a lack of preparation over IR35 changes, causing contractors to leave, instead offering their services to a company who are willing to individually assess their contract and offer full IR35 protection.
If your business engages with limited company contractors then IR35 changes will impact you. This can be a daunting prospect. However, by understanding IR35 and the ramifications it will have on your business you can take the correct steps to comply with the upcoming legislation changes and minimise the effect they will have on your business.
How can businesses prepare for IR35 changes?
In order to retain their top talent and minimise the expense, time and resources needed to prepare for IR35 changes, businesses should use an insurance backed IR35 service that mitigates all risk to the supply chain.
This is where Optimus Shield come in….
Optimus Shield offer a service that
- Determines the IR35 status of a contract
- Produces the government required status determination statement
- Offers an end to end payroll process for all eventualities
- Is supported by both legal and tax opinions
- Includes comprehensive insurance cover to mitigate all risk from your supply chain
- Provides personal protection insurance for the contractor in the event of any HMRC investigation.