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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.
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