The term IR35 has long been a source of irritation to those who want to be self-employed (which has included the author here) and (primarily public) organisations that want to engage them. The IR35 legislation will apply to many private employers.
However, the Government announced, in March 2020, that it is postponing the IR 35 extension of IR35 to medium and large companies in the private sector, to 6 April 2021.
However, small employers are not likely to be caught by the extended legislation in any case. If your turnover is less than £10.2M, your balance sheet less than £5M and you have fewer than 50 employees then you need read no further.
But if two or three of these apply then, unfortunately, IR35 may affect you.
In short, IR35 the legislation allows HMRC to collect tax payments, from the purchasing company, where a contractor is “an employee in all but name”.
This means you will need to look carefully at any contractor where HMRC can make the claim that the contractor is an employee. The definition of an employee is not necessarily the same as might be applied in employment law. For example, “mutuality of obligation”, the “acid test” for employment rights, is largely ignored by HMRC.
These earlier blogs provide some background but please keep in mind they focus on employment rights rather than tax liabilities:
Taking on self employed workers
Self employed worker or sub-contractor call them what you like Mr Mullins
New “self-employed plus” gets Hermes out of the woods how about you?
Options for you will include bringing contractors within your organisation as employees (there are knock-on benefits to this) or preparing a “status determination statement” – which is a document that may well prove contentious in any future demands from HMRC.
If you would like to discuss the pros and cons of various options, please get in touch with Employer Solutions.
Malcolm Martin FCIPD
Author Human Resource Practice
Blogs are for general guidance and are not an authoritative statement of the law.