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IR35

IR35: THE CONTEXT

The IR35 Regulations Are Designed To Assess Whether A Contractor Is A Genuine Contractor Rather Than A'disguised'employee, For The Purposes Of Paying Tax;

Contractors who work through their own limited company (often called a personal service company or PSC) enjoy a level of tax efficiency not given to PAYE employees; They don‘t get employee benefits (like holiday and sick pay), but they do have flexibility and control over their pay structure and benefits;

While in practice the contractor is essentially working as an employee; since they are technically employee of their PSC, the employer is not responsible for their PAYE liability; 

So, IR35 assesses whether contractors are ‘genuine contractors, OR, for all intents and purposes, an employee hired as contractor to avoid tax

The benefit for employers hiring workers in this way is that they don’t have to pay employers’ National Insurance contributions or give contractors employee benefits. The benefit for contractors is tax efficiency; 

IR35: THE UPCOMING SCENARIO​

IR35 regulations have been updated in the last few years and initially were rolled out in the public sector; 

HMRC say that when determining whether IR35 applies to a contract or engagement,“you must work out the employment status of the person providing their services.“

HMRC go on to say that the off-payroll rules apply if the contractor “would be an employee if there was no intermediary“. The intermediary in most cases is the contractor‘s limited company (or PSC); 

Private sector IR35 reform is set for April 2020, which will mean, for the first time, that the onus will be on private sector employers hiring contractors to determine the IR35 status of the individual and be financially liable for this decision. 

G2SERV1CES IS FULLY COMPLIANT WITH IR35 REGULATIONS:

l our consultants are full time PAYE employees of G2serv1ces and NOT ‘Hidden Employees‘ of our clients; 

All of our employees are entitled to all statutory benefits i.e. Sick Pay, Pensions, Paid Annual Leave etc. and these are all provided by us;

Our employees are PAYE permanent staff, NOT shareholders – so they get a salary NOT dividends; 

We comply to all statutory requirements as per UK employment law.

R35 COMPLIANCE: THE KEY POINTS ​

Supervision – Contractors should have freedom over how they complete their work. 

So they cannot be tied to start and finish times or specific hours of work in a week. 

So, IR35 assesses whether contractors are ‘genuine contractors, OR, for all intents and purposes, an employee hired as contractor to avoid tax.

Substitution – IR35 compliance means that contractors should be able to send a substitute to complete the work instead. So the PSC should have multiple people with similar skills. 

Business ‘on its own account – essentially this determines whether you’re actually running your business as a business. Things like a business website, a dedicated office space, multiple employees, are all evidence that a company is operating a business and not offering individual services in the same way as an employee

Payment – self-employed contractors are paid on a project basis, which might mean when the work is completed or at particular project milestones – not on the basis of timesheets.