What is IR35?

If you have a limited company and are contracting to an employment agency as a limited company this will help you to understand your obligations under HMRC’s new tax regulations – IR35.

IR35 is tax legislation targeted at individuals which HMRC say are falsely claiming self-employed status and associated tax allowances when they are working under direction and control of the end-user and enjoying the same conditions as their employees. The changes to IR35 will mean that many limited companies who were previously paid gross will need to be subject to the PAYE system and made to pay Tax and NI at source.

Important Changes to IR35 from 6th April 2020

The extension of the off payroll rules which has already been in operation in the public sector, will come into effect for all private sector workers. Any worker who does not pass HMRC’s self-employment tests will fall inside IR35 and must be paid through the PAYE system and not gross.

For further information please go to www.gov.uk/guidance/understanding-off-payroll-working-ir35.

 

Will IR35 affect you?

All ‘self-employed’ individuals with a limited company, contracting to companies either directly or through an recruitment agency will be affected. The end-user which is the client will have the responsibility for determining your IR35 status – taking the decision out of your hands.

 

Transport Commissioner’s View

One of the key questions at the heart of IR35 is, can a driver be self-employed if they are only providing their time and expertise to the O-Licence holder? The view from the Office of the Transport Commissioners, is that it would be rare for this to be the case if they are not an owner driver.

 

H&G Recruitment and IR35

From our analysis, we believe that under HMRC’s rules, and in line with the view of the Transport Commissioner, all our current drivers will fall inside IR35 and must be paid subject to tax deductions. We expect this view to be industry-wide.

 

Are you Inside or Outside IR35?

If you are a driver and answer NO to any of the questions below, you will likely fall inside IR35 and have to pay tax, national insurance and contributions towards your workplace pension (unless you opt-out.)

  • Do you own the vehicle you drive at work?
  • Can you send a substitute driver if you can’t make it, without the agency’s permission?
  • Can you tell the client when and how to carry out the work?
  • Do you accept financial risk? (this means you don’t get paid if you do a bad job)
  • Are you paid for the completion of a project rather than on an hourly basis?

Unsure? Visit these useful sites:
www.gov.uk/employment-status/selfemployed-contractor
www.gov.uk/checkmyemploymentstatusfortax or you can use their CEST tool.

 

H&G Recruitment

Please email any questions to IR35@h-g-recruitment.com or contact Lauren Keyes the payroll manager can guide you through the process.

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