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IR35

The government introduced the off-payroll working rules, most commonly known as IR35 into the public sector in 2000. This meant that the obligation to determine the tax status of the worker moved from the worker to the hirer and fee payer. The intention behind this was to ensure that individuals working like employees are paying the same employment taxes as employees, regardless of the structure they work through. As of April 2021, HM Revenue and Customs will be extending the off-payroll working rules to the private sector. This means that medium to large-sized businesses in the private sector will also be required to re-evaluate and assess their flexible workforce.

 

What do the IR35 changes mean for agencies?

Recruitment agencies will need to be vigilant and take reasonable care when attempting to determine the tax status of the worker. It is vital that the agency determines the appropriate tax status to reduce the risk of incurring a tax bill for any contractors incorrectly assessed. By taking reasonable care and executing the on-boarding processes correctly, agencies will show their commitment to legislation compliance and reduce the risk of an incorrect assessment.

 

MCL’s Commitment

  • We will continue to work alongside our existing and future clients and determine the clients own IR35 assessment procedures.
  • Upon the successful placement of a contractor operating a Personal Services Company (PSC), MCL will communicate with our clients to obtain a valid IR35 assessment / Status Determination Statement (SDS) for the contractor following their start date. This will determine, based on the questions answered, whether the contractors PSC has been deemed as falling inside or outside of the IR35 legislation.
  • Outside status = completed SDS is communicated to the agency and contractor (as well as other parties within the supply chain i.e. end fee-payer if applicable) for keeping on record until such time that the contractor’s current assignment changes
  • Inside status = completed SDS is communicated to the agency and contractor for keeping on record and clients own re-assessment procedures will take place to establish accuracy and validity of the assessment and work towards a positive outcome.  Re-assessment completed if required.

 

IR35 Exclusions

  • PAYE assignments
  • Contractors using the payroll services of an Umbrella Company or Managed Service Company (MSC)

 

Questions for MCL

Please do not hesitate to contact our team on info@metroworth.com or +44(0) 1252 792020 if you have any questions relating to this article.

 

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