You are here
Five questions on IR35 you should know the answers to
The IR35 reform in the private sector will be implemented on the 6th of April 2021, and it is crucial that businesses are ready for the changes. Both end clients and contractors must have a thorough understanding of IR35 and whether they are inside or outside the legislation.
In our recent webinar, Kyra Cordrey, Commercial Director at PageGroup was joined by and IR35 expert to discuss the ins and outs of IR35. You can watch the on-demand webinar here. Our engaged audience submitted a number of questions to the speakers, and here are five that everyone needs to know the answers to.
Q1. Is the size of the end engager defined by the individual company or the size of the group?
The size of the overall group defines the size of the end client in terms of the IR35 reform and therefore in the example above, you would need to establish if the role was inside or outside IR35 assuming that one of the other two tests were also met.
Also, if the company is part of a group, you need to consider the group.
Q2. Does IR35 apply to workers who live overseas?
If the client or hirer is based in the UK and has a UK entity, then the worker would be subject to the IR35 reforms.
- How do we apply IR35 to European-based contractors?
- If the overseas personal service company (PSC) is providing services in the UK then yes, you will need to consider status and send a Status Determination Statement (SDS). If you conclude that IR35 applies and there is no UK entity in the supply chain to operate PAYE, the responsibility for doing so would lie with you.
- Are overseas consultants excluded from the regulations?
No. It will depend on the circumstances, but broadly speaking, if the overseas PSC is providing services in the UK you will need to consider status.
Q3. When working with an agency, do you just have to ask them whether any individuals have personal service companies? Does the agency have to do the check?
It is best practice to carry out an indicative assessment of the role before the contractor is placed, this would then give clarity to the recruiter as to whether they were looking for candidates inside IR35 (PAYE or Umbrella) or outside IR35 (limited company / personal service company contractors).
When we place limited company contractors at PageGroup, we have a dedicated temp services team who would check the limited company details to ensure strong governance and compliance. We are also asking our contractors working through limited companies to hold insurance to protect them against personal indemnity and IR35 (which would protect everyone in the supply chain should HMRC investigate).
Q4. When advising an agency that the position we want to fill is inside IR35, is it right to assume they would advertise the position as such, and ensure the relevant taxes are being paid? What checks do we need to do after confirming the position is inside?
If you have determined that the role is inside, then it is up to the agency to ensure they are deducting the relevant taxes of that worker. Although it is the responsibility of the end client to determine the status, as long as reasonable care has been exercised, it is the responsibility of the agency (and the liability falls to them) to deduct the relevant taxes. HMRC expect you to keep records to demonstrate that you have told the agency. Do not forget that you need to let the worker’s PSC know your decision.
Q5. Is there a template for the Status Determination Statement, and is there a cross over between this and the CEST results? Can we just share the CEST results as our SDS?
Recent guidelines from HMRC have indicated that they will now accept a printed, dated copy of the response and reason from the CEST tool as a valid SDS. They are also clear that there needs to be evidence that the contractor’s contractual working arrangements are mirrored in practice and therefore completing the CEST tool is only part of it.