April 2021 may seem like a lifetime away. However, if you are engaging contractors, or thinking about taking on contractors to fill some of your skills gaps, you will need to consider IR35 sooner rather than later to minimise the impact on your business. The Government delayed the implementation of IR35 from April 2020 until April 2021 and has now issued a warning that it will not be delayed again.
What is IR35?
Currently, it is for contractors to determine their own tax/employment status. With effect from April 2021, it will be the responsibility of medium and large businesses to assess the tax/employment status of any contractors they appoint and an assessment should be carried out to determine whether an individual falls ‘inside’ or ‘outside’ IR35. you will need to be able to demonstrate to HMRC that you are operating your contracts properly.
What will I need to Consider?
HMRC has four broad criteria for assessing IR35 status which will help you ensure you are assessing correctly. These are:
- Personal Service – Can the contractor replace themselves to provide a service to you if they are unavailable to work?
- Control – Will the contractor use their skills and experience to carry out the work for you without direct day to day supervision over how and when they carry out their work?
- Financial Risk – Does the contractor carry out some of the financial risk that an employee of your company wouldn’t? For example, do they have insurance? If they make a mistake, do they have to put it right in their own time and at their own expense?
- Part and Parcel – Is the contractor entitled to any company benefits or do they participate in company initiatives such as appraisals?
What if I get it wrong?
If you do not correctly assess your contractors, you could be liable to financial penalties from HMRC. There are the potential implications of bad publicity and additional employment contract issues to consider.
Whilst the HMRC guidelines are not absolutely clear, there are a number of questions you can ask to help determine an individual’s IR35 status and provide evidence to HMRC that you have carried out reasonable assessment. We at Agile HR can provide you with the information to do this and talk to you about whether your business is likely to be caught under these regulations. Please2 contact Jenny – email@example.com or 07990 537522 for more information.