IR35 For Our Candidates
Reforms to IR35 legislation, came into force in April 2017 for the public sector, and were extended to the private sector in April 2021. This means that the responsibility for determining the tax status of all personal service company (PSC) interim workers has been passed to the hiring organisation, including potential liability for tax and national insurance contributions.
IR35 exists to address the relationship between the end hirer and the contractor to understand if it is an employment relationship or not, therefore all assignments now need to be assessed to understand if they fall in or outside IR35.
If a contract is found to fall inside IR35 then the contractor is expected to pay the same amount of tax and NI that a permanent employee would pay.
Similarly, the end hirer is expected to pay the matching NI and both parties are held accountable if the funds aren’t paid correctly.
When a contract assignment is assessed as inside IR35 there are 3 different ways a candidate can now engage:
PAYE – all statutory deductions for PAYE tax, NI and pensions are deducted at source. Holiday pay is accrued and paid when you are on holiday. Auto enrolment onto a pension scheme (can opt out).
Umbrella Company – there is a contract with an Umbrella company that manage all statutory deductions. Vantage pay the Umbrella company and they are responsible for paying the contractor. The decision on holiday pay accruals is down to the contractor. There will be a small weekly fee charged by the Umbrella company. Contractors chose Umbrella companies to simplify continuity of earnings for their own financial planning ie mortgages / pension provision.
Deemed Ltd - the contractor operates through their Ltd company but the liability shifts to Vantage as the deemed employer and therefore the gross rate is reduced to account for Employers NI. Holiday pay is included into the gross rate and not accrued. Contractors are not auto enrolled onto a pension. Vantage deduct PAYE tax and Employee NI. Corporation Tax and tax on dividends may still apply.
If a contract assignment is deemed to be outside IR35 then the contractor is considered to be a genuine contractor and not a disguised employee. This means the hiring organisation and HMRC consider the contractor to be self-employed and the contractor must pay the right amount of tax and NI for the money they receive for their work.
It’s incredibly important that you know where you stand as a contractor should you wish to work through your limited company.
We’ve partnered with Kingsbridge Contractor Insurance to provide an award-winning IR35 solution that manages the entire process, from status assessment to process consultation, allowing your end client to undertake a robust assessment of your assignment.
If your role is found to be inside of IR35 then you have the 3 options above to consider which way you engage with your agency and end hirer.
If your role is found to be outside of IR35, we will ask that you hold IR35 insurance. Kingsbridge also offer a market leading, Zurich underwritten IR35 insurance policy that protects the whole supply chain for up to £100k legal defence costs and £100k tax liability, as well as providing a legal expenses policy.
Not only does this insurance protect you, but it's designed to flex to cover the fee-payer and engager as well. This means that your entire supply chain is protected against the potentially crippling costs of an IR35 enquiry and any tax debts found owing - peace of mind for you, and a safe bet for your client.
Should you wish to purchase your IR35 insurances from Kingsbridge,
you can call 01242 808 740 or...