IR35 Implications
IR35 is the common term for the Intermediaries Legislation, first introduced in April 2000, with the aim of addressing tax avoidance by individuals working in the role of an employee but through an intermediary, such as a limited company (also commonly known as disguised employees).
Limited company contractors - otherwise known as personal service companies (PSCs) - have been responsible for determining their own status and paying the relevant taxes up until April 2017, at which time public sector contractors were subject to the status decisions of their end client. These rules will apply to private sector from April 2021.
IR35 is a complicated piece of legislation, ultimately differentiating a genuine business operation from those acting as an employee of the end client. There are a number of tests used to determine employment status for tax. CEST is the official HRMC tool.
Client Obligations
The responsibility for determining the IR35 status of a contract will shift from our limited company contractors to our clients and will be applied to all payments made on or after 5th April 2021. As our client you will be responsible for determining the IR35 status of all off-payroll workers we provide.
From April 5th 2021, Bid Solutions’ clients must provide a ‘Status Determination Statement’, which states whether or not you believe IR35 applies, to both the contractor and the next party in the contractual chain - which will generally be Bid Solutions (unless you have an RPO in place) - and crucially, the reasoning behind it. Reasonable care must be taken in arriving at a determination. Until this statement is provided, you will be classed as the fee-payer, taking on the IR35 liability and responsibility for deducting the appropriate tax and NICs from the contractor before paying this to HMRC.
If Bid Solutions or our contractor disagrees with your IR35 decision, you have 45 days to respond and must provide the reasoning for the decision made. If you fail to do this, you will then become the fee-payer, meaning the IR35 liability will transfer to you, assuming you do not carry it already.
Bid Solutions Obligations
Upon receipt of a ‘Status Determination Statement’ from our client, we will be required to either pass the statement along the supply chain to the fee-payer, or where we are the fee-payer (if the contract falls within IR35 rules), deduct the appropriate tax and NICs from the contractor’s fee before making payment, unless our client fails to adhere to their obligations.
Obligation-based Liability
In situations where HMRC does not receive the tax due, the government proposes that the liability should initially rest with the party that has failed to fulfil its obligations until such a time that it did meet those obligations. This means that the liability would move down the labour supply chain as each party fulfils its obligations.
The government believes that by giving HMRC the power to move any liability down the labour supply chain it provides an incentive for all involved to comply with the revised legislation and their new obligations, thereby increasing overall compliance.
Bid Solutions’ Approach to IR35
To provide a fair, independent and transparent assessment of all contracts, we have partnered with leading IR35 experts, Qdos Contractor, to provide Status Determination services.
Who are Qdos?
Qdos have been defending contractors against IR35 since 2000, successfully defending over 1,600 cases and saving contractors over £35million in tax and are one of the most trusted opinions on IR35 status.
Status Determination Process
Prior to commencement of a contract with Bid Solutions, our clients preferred contractor will be invited to undertake a 42-question assessment via the Qdos Status Review online portal.
The contractor completes the assessment to the best of their knowledge, and this will then be reviewed by a Qdos consultant and emailed to our client. Assuming our client agrees with the facts, the contractor will be issued an IR35 Status Determination Statement via email. This will also be available to download via the Status Review portal. The report will clearly state whether the contract falls within IR35 or outside of it.
Should you have any queries regarding IR35, please contact Martin Smith on 0208 1583952.
