IR35

The storm ahead

If your business engages individuals who work through their own personal service companies the government are planning on changing the IR35 legislation and it may have a direct impact on your business.

IR35 essentially ignores the existence of a personal service company and considers whether an individuals works in the same way an employee. Where HMRC believe this is the case , they will raise assessments for the tax loss, penalties and interest.

From April 2020 the responsibility for determining whether IR35 applies i.e. whether they should have been paid like an employee, will rest with the end client where they are a medium to large sized business. The threshold for being a medium of large business is lower than one may think and so it is important to consider this point rather than just assume the changes will not apply. If the company accounts have to be audited, the company will be medium/large.

If the client is deemed to be a small business, the previous version of the IR35 legislation (Chapter 8 ITEPA 2003) will continue to apply and the PSC will be responsible for determining the IR35 status and be liable if the decision is incorrect.

For medium and large clients, there is no need to panic about the legislation, provided the position is carefully considered, end clients can remove their risk quite easily. The legislation requires clients to take reasonable care in deciding whether IR35 applies and the client must then provide the ‘fee payer’ confirmation of its decision. If the client does this and does not then fulfil the role of being a fee payer as well, they will not be liable under the legislation. If the end client is also deemed to be the one paying the PSC directly, they will be liable if their position is incorrect but this sounds like a scarier proposition that it is in reality. Yes, the liabilities can be good but HMRC have a very poor track record in winning IR35 cases and provided the correct due diligence has taken place, there is no need to put everyone on PAYE as a knee-jerk reaction to the change in legislation.

How can we help?

The owners of Marble also head up a specialist tax practice called Trinity Tax Ltd which has expertise in IR35, employment status and the agency legislation. This enables us to assist end clients and agencies to eliminate their exposure to IR35.

Trinity Tax can provide the client with the service of carrying out the IR35 assessments and sending out the Status Determination Statements. At this point, the client can demonstrate they have taken reasonable care. Marble can then pay the personal service company according to that determination thereby becoming the Fee Payer. This is a simple and effective way of addressing the legislation.

How can we do this?

We have considerable experience in the field of employment status and IR35. We have defended HMRC challenges in most industries including IT, construction, white collar, TV and radio and across a ranges of business sizes. See our meet the team page for more information about the people behind Marble but essentially the owners have defended cases at the tax tribunals, written many articles for different tax publications and written books about defending HMRC enquiries and off payroll working.

In addition to the above, Marble had both a VAT and HMRC enquiry in 2019 neither of which raised any issues and so we have a clean bill of health.

Marble are not the same as others in this industry who have little experience by way of advising and defending HMRC enquiries. We are the experts and between Marble and our tax consultancy practice, you can rest assured you will receive the best service to protect your business.