October 5, 2019

IR35 – What it means for Clients

The Off-Payroll Rules/IR35 is not new tax legislation.  Rules have been in place since 2000.  However, changes to these rules were implemented in the Public Sector in 2017 and were rolled out to the Private Sector on 6th April 2020.

The original rules sought to prevent contracting from being used as a vehicle for tax avoidance by those whose role would otherwise be a normal employment role at the client organisation. For most of its history, the legislation has allowed the Personal Service Company (PSC) or umbrella company of the contractor to determine his or her IR35 status and pay the required taxes to HMRC. 

The changes aim to tighten up the system around IR35, broadly by moving the responsibility for determining a contractor’s IR35 status to the end-client, and moving responsibility for the payment of any resulting HMRC taxes to the organisation paying the PSC.

2020 IR35 Changes – what it means for clients: https://www.practicus.com/wp-content/uploads/2020/02/IR35-Brochure_clients-V10.pdf

Should you fear liability?

Not as you might think. In the actual experience of our public sector clients, the risks are quite manageable and will obviously reduce towards zero if you are fulfilling your obligations to:

Pass on an appropriate status determination statement (sds) to the agency and the contractor before the contract starts

Use reasonable care when reaching an sds

Respond to a status disagreement notice within the allotted 45 days

Are trading with reputable, well established agencies in your supply chain

This last point is important. If HMRC cannot recover monies from the offending party in the supply chain then they are able to chase that debt across it, all the way to the end client as a last resort. In order to minimise your potential risk, it’s very important you know who you are trading with, their ability to fulfil their new responsibilities and the supply chains they are involved in. 

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