Posted in Freelancer, Top tips, Tools & Advice, Learning,
Last month we hosted a webinar with Sean Mackenzie, Senior Business Development Manager for Parasol Group to tackle the new IR35 Reforms. You can watch the webinar back here.
With the changes coming into play today (April 6th 2021) Sean has answered some of our community’s questions…
Inside IR35 means the assignment/role is deemed as employed so for tax purposes all National insurances and income tax needs to be paid including employers NI.
Outside IR35 means the role is deemed as a true business to business relationship so you can work through your limited company.
The off-payroll reforms are set up for limited company contractors, however, to be self-employed you need to demonstrate the same set of criteria so in some ways it does. If an end client is saying you are inside IR35 they are saying for tax purposes, you are deemed as an employee so need to pay the right level of tax.
The issue here is that the end client will be the ones making the determination and you should be issued with a status determination statement before you start the role. This will tell you which way you have been assessed, if they agree to a change in working practices so you are working outside that’s great, but they may not agree to this. However, the more that you can do to show that you are outside IR35 the better.
This is up to you, which way to go... Most agencies will have you down to automatically opt out unless you are deemed as a vulnerable person or working with vulnerable people.
HMRC could go back 7 years, they have said they are not looking to retrospectively go back after contractors as they just want more compliance within the rules however, they cannot rule out going back if they feel there was tax evasion.
This is correct, small companies are exempt so will not be making the determinations, but it is important to remember that IR35 will still apply it is just down to you as a contractor to determine your status and you also take the on the liability if incorrect.
Yes, that would be enough, if used even better but its very rare that we see substitution clauses exercised. Remember you would have to find the substitute and pay them. It also needs to be genuine so if you did put in a substitute it would be accepted and its not just in the contact to get around IR35.
No Substitution would just be for limited companies.
It’s a mix dependent upon how they are registered but most are exempt, or they have already been through the reforms when it came into the public sector.
The employers NIC should always be covered by the employer and not the employee. However, you may see that your rate is changed to reflect this so a £500 day rate would become a £420 day rate and then uplifted to £500 to cover employers NIC. However, some companies are uplifting original rates by 13.8% to cover employers NI, it is a mixed bag across all sectors.
If you are deemed inside IR35 and work through an umbrella, the umbrella covers the Statutory sick pay and claims this back through the government.
Up until 6th April 2021 you as a contractor would be liable to unpaid tax and NICs if HMRC deemed the role inside IR35. After April it will be the fee payer (agency/end client) who will be liable for any work carried out after the 6th April 2021.
Yes, if you work multiple assignments, they will all be assessed individually, any that are deemed outside of IR35 you can use your limited company but if any are inside of IR35 you will need to use an umbrella or agency PAYE. So, you could be using both options at the same time.