IR35

In the Private Sector

If your business engages individuals that work through their own limited company the government are planning on changing the IR35 legislation to make the client responsible for determining whether they should have been employees.

IR35 essentially removes the existence of the limited company from the contractual chain and considers whether the individuals would be deemed an employee were it not for their limited company. If they should have been on PAYE the liability for this is currently a matter for the limited company contractor to resolve but following the consultation during the summer, the government are looking at moving this liability to the client or company paying the limited company. In essence, clients will be liable for the tax and national insurance for any limited company contractors they pay meaning it is absolutely vital that they get their employment status correct!

When IR35 was first introduced in 2000 the original plan was that the client would be the liable party but after heavy lobbying this was amended so that the personal services company was liable. It is partly for this reason why HMRC have been so ineffective at tackling IR35. If the goalposts are moved, HMRC can target clients in relation to all limited company contractors they engage instead of having to open individual enquiries into each and every contractors company. Perhaps more important to HMRC is that clients will also have the means to pay the liabilities whereas very few personal services companies have the reserves to meet an IR35 liability, this fear of liability will automatically lead a lot of companies to push contractors onto PAYE rather than risk a liability further down the year. All in all a win, win for HMRC.

The owners of Marble provide IR35 defence services via their other business, RIFT Legal Services. We have vast experience of HMRC enquiries and employment status and can review how your business operates in relation to IR35, the level of risk you face and different ways to mitigate that risk. If you have an IR35 enquiry we can defend your position on a fixed fee or no win, no fee basis including representing your business at the tax tribunals.

We have defended HMRC IR35 challenges in most industries including IT, construction, white collar, TV and radio. See our meet the team page for more details about the people behind Marble and our experience.

In the public Sector

If your business operates within the remit of the public sector you may already be aware of the changes to IR35 that make the client or company paying the contractor liable if the individual’s employment status is incorrect.

The initial reaction to the changes were that many clients simply moved everyone over to PAYE. This is not surprising given how little notice was given for the change in legislation and the fact that HMRC did not publish any guidance on this area until 6 months after the legislation was implemented. We have however seen a shift since of companies starting to consider the position in more detail and be prepared to engaged people on an “outside IR35” basis subject to the carrying out their own due diligence.

RIFT are well equipped to provide companies concerned about IR35 with the due-diligence and IR35 compliance role within their business whereby we speak directly with the contractors to assess the manner in which they work. We provide a report on each contractor to aid the company in assessing IR35. This builds a compliance portfolio in the event of an HMRC enquiry and illustrates that the client takes its responsibilities seriously. As part of this service we will also defend any challenge on IR35 by HMRC without further charge. This provides our clients with complete peace of mind that they are operating correctly whilst still remaining commercial that they are not limited their pool of potential resources by only offering PAYE.

Get in touch with our sister company RIFT Legal for more information.