4 months on since the IR35 Off Payroll Working Reform took place in the private sector and a lot has happened since then. Along with the world getting back to ‘normal’ following COVID, businesses have also been getting used to the new ‘normal’ when dealing with the world of contractors. With new obligations, policies and procedures for businesses engaging contractors, now feels like a good time to reflect on what has happened since 6th April 2021.
Following the introduction of IR35 legislation in April to the private sector, there has been some concern that fishermen operating through their own personal service companies (PSC’s) would be caught under these new rules. The impact of the legislation for those within the IR35 rules means payments made to the PSC will now be operated via payroll with Income Tax and National Insurance Contributions deducted at source rather than the much lower Corporation Tax rate applying to profits within the PSC. This will also remove the opportunity for contractors to draw dividends from their PSC from inside IR35 income, which would have seen them benefit from lower tax rates. Businesses which engage with PSC’s are responsible for assessing the status under IR35 unless they qualify for the Small Companies Exemption.
As we find ourselves in another National lockdown, businesses may be questioning whether we will see another delay to the implementation of the IR35 Off-Payroll Working changes due to come in from April 2021. This however is wishful thinking as we hear the Government has pledged its commitment to introducing the rules as planned with Parliament having already passed the legislation.
As we are approaching the round-up of 2020, businesses should ensure that considering the IR35 Off-Payroll Working changes from April 2021 is high on the to do list for when we are all back in January. While April may still seem some time away, to ensure compliance with these changes, time should be spent sooner rather than later to implement appropriate processes and procedures for managing contractors going forward.
Towards the back end of 2019 and as we entered 2020, the majority of UK manpower and recruitment (“MPR”) businesses were firmly focussed on ensuring their business models were Brexit ready. However, as 2020 unfolded, and the impact of COVID-19 shook the global economy, attention quickly turned to resilience, cash flow management and damage limitation to ensure survival and for businesses to come out of the other side of the pandemic.
As we edge closer to April 2021 when the private sector will be hit with new IR35 legislation, pushing responsibilities for contractor assessments and deduction of tax up the contractual chain, it is now time for businesses to dust off their IR35 plans from earlier this year for the original implementation date of April 2020.