EdenGroup answers your Frequently Asked Questions on IR35

January 23, 2020

IR35 is dominating the headlines as there’s only a matter of weeks left to get your working practices and systems up to date. Whilst the date in everyone’s mind is 6th April, there is a lot you will need to do to make sure you can pay your contractors for the hours they’ve worked in March.

What is IR35?

The IR35 Off-Payroll regulations were introduced in the public sector in 2017. They will apply to the private sector from April 2020. The aim is to make sure that contractors and employees both pay the same amount of tax and National Insurance if they are doing the same work. It aims to tax disguised employment.

Who does the IR35 regulations apply to?

IR35 Off-Payroll regulations apply to agencies who supply Contractors via their own PSC. If you fall into this category you will need to implement huge process changes before April. This could mean having to set up a whole new way of working, hire more staff, carry out software implementations & integrations and more. If you are supplying con tractors to smaller clients IR35 may not apply under the small business exemption.

Small Business Exemption

You will need to confirm with your end clients if they can be considered a small business. They must meet 2 out of the following criteria:

  • Turnover is £10m or under
  • Your balance sheet shows £5m or less
  • You employ 50 people or less

How can I check to see if my workers are inside IR35?

You may want to use HMRC digital tool CEST with your client. There has been wide-spread criticism of CEST (Check Employment Status for Tax). This is the way that HMRC advise you to check to see who qualifies. There are some specialist accountants and lawyers that can alternatively manage this for you, so it is worth a check online.

What is a PSC/Limited company?

Many contractors set up a Personal Service Company. This is a limited company with the contractor as the sole director and shareholder.

What is RTI?

Real Time Information or RTI is information you will need to upload to HMRC each time you pay your workers who have been deducted Tax and NI. You will need to do this using a Full Payment Submission (FPS). If you do not pay any employees in a particular pay period you must notify HMRC by sending them an Employer Payment Summary (EPS) to ensure HMRC do not issue you with a penalty notice because they were expecting an FPS From you. 

If you’re concerned about IR35 causing your recruitment agency issues and you’re worried about being able to pay your contractors once the regulations come in, EdenGroup can talk to you about either providing an Umbrella employment solution or outsourcing your contractor payments.

Get in touch with Beverley on 01276 688032 to discuss your options or email bstanding@edenoutsource.co.uk