The purpose of IR35 is to clamp down on the growing use of contractors providing services, usually through a Personal Service Company, while working like a traditional employee but experiencing tax benefits afforded them by a limited company.
 
The upcoming changes to IR35 follow on from the 2017 public sector changes and are set to come into effect on 6 April 2021 after being delayed a year due to the COVID-19 pandemic.
 
The upcoming changes mean a contractor is no longer responsible for determining their own IR35 status, it will be the end client where the assignment is being carried out that decides the status of a contractor’s assignment. They then take on financial responsibility for potential underpayment of taxes.
 
A contractor’s end client is required to carry out an IR35 assessment for each assignment and pass the results of that assessment, in the form of a Status Determination Statement, to each party in the supply chain.
 
Once a role assessment is complete and found to be ‘inside IR35’, an individual may require an umbrella solution. An umbrella solution offers a hassle-free way for contractors to be paid and provides full employment rights as the contractor becomes an employee of the umbrella company. High quality, FCSA accredited umbrella solutions include statutory sick pay, holiday pay and parental leave. Some umbrella solutions even offer comprehensive insurances and access to extensive benefits such as retail discounts, corporate gym memberships and access to online GPs with an email prescription service.
 
If a role is found to be ‘outside IR35’, a contractor can carry on using their Personal Service Company, just as before. Some accountancy providers offer support packages that include help and advice on staying ahead of any further IR35 amendments, carrying out assignment reviews when roles change, and insurances to back an outside result.
 
Whether you are currently working as a contractor, considering becoming a contractor or own a business that hires contractors, IR35 is something that you should be familiar with. However, if you have any questions or need clarification, please contact one of the IR35 experts at ICS Accounting on 0800 880 7056 or email ir35@icsuk.com.