Do you use UK Contractors? Are you on top of the recently changed IR35 rules which impact Irish recruiters and businesses? If the answer to this is no, you are not alone.
Many of our Irish recruitment partners and their clients are unsure if they have taken all the appropriate steps to manage the IR35 changes which came into force on 6 April 2021.
This article provides some key practical tips and advice to help you get on top of what you need to know and do to stay on the right side of the new rules.
Background
To put it simply, IR35 is UK tax legislation that looks to determine whether a contractor is actually an independent contractor or a disguised employee. If the relationship is that of an employee and employer, IR35 seeks to tax the contract income as employment income. The rules apply to contractors providing their services through UK Personal Service Companies (PSCs).
From 6 April 2021, the liability and responsibility of assessing whether the worker is actually a contractor or employee shifted to the client. The client therefore must determine the employment status of the worker from 6th April on.
Learn from the ghosts of IR35 past
The changes enacted on 6th April 2021, were also implemented into the UK Public Sector back in 2017; however, the rushed implementation of the rules back in 2017, coupled with a risk-averse approach to IR35 by the Public Sector, resulted in chaos for all involved along with delays to projects.
Rather than risk a repeat of that experience, Irish recruitment businesses can better assist their clients in managing the changes being introduced.
Disruption and uncertainty are going to be a given for a lot of clients over the coming months. It doesn’t have to be this way though if the lessons of 2017 are taken on board. The public sector learned, the hard way, that the way to deal with IR35 is to carry out proper assessments. We hope the below practical steps will assist you in managing the upcoming changes.
Practical preparation steps for Irish Recruiters.
Step 1: Identify the Risk: carry out a review of your contract book immediately.
As a starting point, a review of your contract book should be carried out immediately, to identify contractors working through a UK PSC or who are physically working in the UK .
The new rules apply to payments made from 6 April 2021. Payments in April will most likely be in respect of work carried out in March, so time is of the essence in identifying the risk areas and contacting contractors and clients impacted by the new rules.
Step 2: Carry out assessments on employment status
For any risky contracts identified, carry out an assessment on HMRC Employment Status Checker (CEST) to determine if the contract is likely to be inside or outside IR35 Rules. We recommend you do this with the contractor to ensure the answers are an accurate reflection of what actually occurs in the contract.
Before you contact the client, you may want to contact a specialist IR35 advisor to assist with assessing your contractors IR35 status. These experts provide peace of mind for everyone involved and can indemnify your client from IR35 liabilities, if HMRC challenges the assessment.
Step 3. Make Contact with the Client: Determine the Client’s connection to UK status and discuss any contracts at risk of IR35 with them
If your client has no taxable presence or connection to the UK, they are outside IR35 Rules. In this situation the risk of IR35 falls back on the contractor’s PSC.
If the client however has a taxable presence or a related group company in the UK, they will be responsible for carrying out the CEST determination.
If the client is not familiar with IR35, it might be beneficial to have the IR35 specialist on hand to walk them through the process and assist in carrying out the determination. Some of the good providers provide indemnity protection which removes the risk from the client, and also for you as a result.
As best practice, request the client shares the CEST results with you for your file.
Step 4. Update your contracts and Terms of Business
Get your contracts and terms of business reviewed by an IR35 expert to ensure they are IR35 compliant. A well-written contract rarely gets you out of IR35 trouble, however a badly worded one can quickly get you into trouble!
You may want to recommend your client also get their contracts reviewed.
Step 5. Upskill your Team
Ensure your whole team is aware of IR35, what situations are potentially inside or outside IR35 and the responsibilities of each entity in the contract chain. Equipping them with the knowledge and wording to reassure nervous clients and preventing clients pulling down the stutters on using UK contractors will be important.
Key lessons were learnt from the rollout of IR35 in the Public Sector in the UK in 2017. It will be important clients are aware of these lessons to avoid making the same mistakes as the Public Sector.
Contact our team at Fenero if you are interested in availing of a free training session for your team with our experts.
Step 6. Define and rollout your processes for dealing with IR35 situations
IR35 is here to stay. The UK is a massive talent pool for contractors and ensuring your business is consistently protected when using UK contractors will be important.
Need more help with IR35?
Whether it is IR35 training for you, your team, or your whole organisation –Fenero can help with free tailored training and guidance.
For contracts review, our team can also help, by putting you in touch with our IR35 specialist partner.
You can also check out our short IR35 explainer video which provides great insights and practical tips to manage IR35.
As multi-award-winning tax experts in all things contracting, our team will be sure to help with any IR35 questions.
Contact +353 1 687 7400 or email hello@fenero.ie
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