IR35

IR35 is changing from 6th April 2020, this will have impacts on end-clients and contractors working through limited companies.

• These changes were applied to the public sector in 2017 and from 6th April 2020 they apply in the private sector. They mean that the end-client (contracting company) is now responsible for determining the IR35 status of a contract with a Personal Service Company (“PSC”).

• The new legislation does not apply to private sector end-clients who are ‘small’ companies which means meeting two or more of the following criteria:

  • Annual turnover is no more than £10.2 million

  • Balance sheet total is no more than £5.1 million

  • No more than 50 employees.

• If a private sector end-client meets two or more of these criteria, the rules are not changing.

• The end-client must confirm the IR35 status of a contract by providing a ‘Status Determination Statement’ (SDS). It’s the responsibility of the end-client to establish arrangements to consider any disputes from PSCs about the SDS.

If a contract is considered to fall within IR35, the end-client will treat the payment to the contractor as if it were a PAYE payment and deduct income tax and NI. The contractor can then pay the net amount to the worker with no additional tax liability arising.

What seems to be happening is that many end-clients are taking a ‘blanket’ approach and deeming all contracts as falling within IR35 without considering their merits on a case by case basis.

Every case will be different and it is not possible If you think this might affect you, please get in touch; andrew.carter@continumm-ltd.co.uk