IR35 is a piece of legislation that allows HMRC to collect additional payment where a contractor is an employee in all but name. The purpose of IR35 is to clamp down on 'disguised employment'. So, if you have someone carrying out jobs for you who you call 'self-employed' but deep down you know they're an employee this will really apply to you.
The changes come into force on the 6th April and mean that business will be responsible for assessing an individual's employment status.
These are the guidelines for the changes. However, I'm afraid that it is still unclear exactly who this will affect.
- The reform will not apply to the smallest 1.5 million businesses. What is unclear at this point is exactly who these businesses are.
- The reform will apply to large and medium businesses who will be given longer to adjust, with the changes being introduced in April 2020.
- From 6 April 2020, medium and large businesses will need to decide whether the IR35 rules apply to an engagement with individuals who work through their own limited company
- Where it is determined that the rules do apply, the business, agency or third party that pays the individuals limited company will need to deduct income tax and employee NICs and pay employer NICs to HMRC
- HMRC will not be looking to review employment status in previous years so it's only from April 2020 that this applies.
If you are unsure if you are working with a contractor/associate (or are one) who could be classed as an employee HMRC have a tool in which you can Check Employment Status for TAX (CEST). Heres a link to the CEST tool.
If you are investigated, as long as you have filled out the CEST tool and have complied with the confirmation, even if this is found to be wrong going forward, you won't be expected to go back for claims. Please note though that if you complete the tool and ignore what it suggests then you're going to be on a sticky wicket.
Workers are entitled to fewer statutory rights than employees, but do have some key legal rights, including:
- Protection from discrimination.
- Protection against unlawful deduction from wages.
- Entitlement to the national minimum wage.
- Self-employed status
- The self-employed enjoy no statutory employment rights (although they may be protected by discrimination law).
Obviously when you look at the legalese it can look a little daunting, and you may worry about inadvertently falling foul of this new legislation. The good news is that help is at hand. Just give me a ring with any questions and I'll be glad to help you out.