With the 6 April deadline for the new off-payroll rules (IR35) fast approaching, HMRC has produced a factsheet for those working through intermediaries.
Are you affected by the new rules?
If you provide your services to a client through an intermediary (e.g. your own limited company) and you would be an employee if you worked directly for the end-client, the IR35 rules apply. These rules currently require you to self-assess whether IR35 applies and to account for PAYE tax and NI on fees you receive from your client.
However, from 6 April 2020, if your client is a medium-sized or large private sector business, your client will be responsible for deciding if IR35 applies. If so, your client will deduct the PAYE tax and NI before it pays your fees. You will no longer be able to self-assess – you lose control of the assessment process.
The new rules have no impact on you, if your end-client is a small private business. You will continue to self-assess as you have done to date.
What should you do in preparation for 6 April?
HMRC explains that you, as the contractor, don’t need to take any action in preparation for the changes. However, it goes on to say that if you think you will be affected by the new rules you can ask each of your clients for a Status Determination Statement which will indicate if your client plans to apply the new rules, and their reasons.
If this change is likely to affect you, we strongly recommend you ask for a Statement unless you’re happy to have PAYE tax and NI deducted from your fees from April.
Challenging a statement
If you disagree with you client’s determination, you are entitled to formally challenge it. They are required to reply within 45 days, which means you need to act soon if you wish to negotiate the terms of your work so that it’s not caught by the new rules.
Employment rights
Off-payroll rules (IR35) have no effect on employment law. Even though the new rules may apply to your engagement with your end-client, they create no new employment rights. Unless you have a direct employment contract, you will not be classed as an employee of your end-client. This means that you will not be entitled to statutory payments (e.g. sick pay) or any new employment rights from them.
For more information on HMRC’s new factsheet. See: HMRC factsheet for contractors
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