Ensuring all of the contractors you’re working with have their Status Determination Statements (SDSs) prior to the new IR35 rules coming in on April 6th will ensure projects continue to run smoothly. But IR35 is not a one-time thing that you can tick off your list and forget about. It’s a whole new set of processes that will change the way you work with contractors.
It’s vital that you understand what will happen once SDSs are issued and how this will affect your business.
HOW WILL CONTRACTORS BE PAID?
There are a number of different ways a contractor can be paid and of course, IR35 comes into it.
- Permanent role or fixed-term contract – paid on a pay as you earn (PAYE) salary basis, complete with full benefits package.
- Via a limited company – if the determination you made as the end hirer is outside IR35, then the contractor can be paid directly into their limited company.
- Agency PAYE – a taxable salary with deductions and National Insurance contributions taken.
- Umbrella PAYE – a way of being paid that allows contractors to work with multiple agencies, access statutory benefits and claim legitimate expenses.
OFFERING UPLIFTED RATES
As an end hirer you will want to be able to attract top talent when it comes to contractors and maintain a good reputation. This could be undermined under the new rules as contractors see their take home pay reduce once the IR35 determination has been made. This is where an uplifted rate comes in, as contractors will no longer be able to take advantage of the tax benefits of working through a limited company.
ENSURING YOUR PAYROLL SOLUTION IS COMPLIANT
Putting compliance protocols in place as soon as possible will aid a straightforward transition come April 6th. Accountants and IR35 specialist advisors will be instrumental in this, but end hirers must continue to make sure the working relationship reflects that set out in the contract’s SDS, otherwise you could find you’re no longer compliant.
WHO IS THE FEE PAYER?
While it’s up to you as the end hirer to determine the status of a contractor under the new rules, you may well not be the fee payer. If there’s a recruiter involved, then that will be them and it’ll be their responsibility to pay the necessary deductions to HMRC. Everyone in the supply chain has an obligation to ensure the IR35 regulations are being followed and should expect to liaise with each other to facilitate full compliance at each stage.
HOW TO STORE INFORMATION IN A CENTRAL LOCATION
Storing information on contractors and the determinations made under IR35 for each contract in a central location is important for the smooth running of your business. Not only could it be required by your colleagues, but other parties in the supply chain may request this information, as could HMRC further down the line.
End hirers must gather together evidence to show they took reasonable care in making IR35 determinations. HMRC can query practices for up to six years and claim any unpaid deductions, so it’s vital this information is to hand. Consider using a specialist portal, such as the one offered by Brookson, to retain and organise documents in one place so they can be easily accessed when required.
For more help and support with the IR35 process, get in touch with Brookson now.