Introduction to IR35
HM Revenue and Customs (HMRC) introduced the ‘intermediaries legislation’, which became known as IR35, in the 2000 budget to combat “disguised employees”. The term refers to individuals using a limited company to provide their services that pass the employment tests. If were it not for their limited company, they would otherwise be employed by their end client.
In 2017 the Government shifted the responsibility of determining contractors’ status to organisations in the public sector.
In April 2021, the same reform has been rolled out in the private sector. From this date, medium and large businesses (and similar unincorporated bodies) hiring contractors are now the ones liable to determine their off-payroll worker’s status; if you are in engagement with a small business, then the assessment process stays with you – the contractor.
IR35 for Recruiters
The new private-sector reform places a greater emphasis on the recruiter in IR35 status determination. The latest IR35 reform in the private sector effective from April 2021 means that it is now the client’s responsibility to decide IR35 status, and recruiters can help calculate the impact of the change for their clients.
It is more crucial now than ever for the recruiter to understand the IR35 legislation, and Smartwork is here to help every step of the way. We have been advising agencies for nearly two decades and continuously updating our knowledge to support our clients’ needs.
Contractors Inside IR35 – Working with SmartWork
If a contract is deemed to be inside IR35, working through an umbrella company such as SmartWork could be the perfect solution.
The primary function of an umbrella company is to organise payment for fixed-term work undertaken by independent contractors. When signing up with an umbrella company such as SmartWork, the contractor becomes one of its employees. They act as an intermediary between them and their agency or directly the end client if no agency is involved.
SmartWork provides a full package with a host of additional benefits.
- We process statutory sick pay, maternity/paternity and holiday pay and can assist you with mortgages advice and references.
- We cover our contractors’ work-based insurances, including Professional Indemnity and Employers/Public Liability.
- We offer personalised service and assign a dedicated account manager allocated to each contractor. Contractors have access to our SmartWork portal, allowing them to easily upload timesheets, submit expenses and e-sign documents.
- In terms of compliance, SmartWork is a fully accredited FCSA member. We undergo a yearly audit to demonstrate that we fully comply with the trade body’s strict code of conduct.
IR35 for Contractors operating a PSC
If you currently trade through your own limited company (Personal Service Company or PSC), you may be concerned about the changes to the IR35 rules.
As we mentioned above, from April 2021, medium and large-sized businesses will be responsible for determining the contractor’s IR35 status; if you are engaged with a small business, the assessment process stays with you – the contractor.
Umbrella & Limited Dual service
If you operate via a PSC and your current engagement falls inside IR35, you may wish to keep your company for contracts outside IR35. We offer an option for you to do just that. With a fixed monthly fee of £95+VAT, we will oversee your umbrella income and look after your limited company so that it is ready for you to pick up where you left off.
It is important to remember that working outside IR35 and via a limited company is still the most tax-efficient way of trading despite the legislation changes.