As you may know, the rules for the taxation of individuals providing their services through via a personal service company (PSC) are changing. As of April 2020, IR35 changes will affect all contractors, including those working in the private sector, who do not meet HMRC’s definition of self-employment.
Morson are aware of the proposed IR35 changes and we have been lobbying government and our associated industry bodies about the importance of our contractors operating via Limited Company and the flexibility it provides for companies.
We are therefore keen to understand your views and, as such, are running a short survey (2 mins to complete) to discover how the new rules will affect contractors like you. This will help towards shaping our plans for how we can best support our contractor community.
To thank you for your time, we will be running a prize draw to win a £200 Amazon voucher, please enter your email address at the end of the questions to be eligible. Click here to take part in our IR35 Contractor Survey.
What is IR35?
IR35 is intended to catch any individual who but for the supply of their services through a PSC (treated, for tax purposes, as an ‘intermediary’), would otherwise be regarded as an employee of the end-client to whom the services are being provided.
Payments received by a PSC, if caught by the IR35 rules (often referred to as operating “inside” IR35) would be subject to tax and NI as if the individual were a PAYE employee of the end client. The resulting tax liability would fall upon the PSC.
Whether an individual is operating “inside” or “outside” of IR35 has been previously determined in the first instance by the PSC itself. If HMRC disagree with the PSC’s initial determination and cannot reach agreement with the PSC, then the tax tribunals/courts would decide the position.
The main IR35 changes will include: -
a simplification of the determination of status of the individual through use of a tool developed by HMRC known as CEST (short for Check Employment Status for Tax). This is commonly used in the Public Sector and has a number of limitations
the responsibility of determining status will lie with the end-client, rather than the PSC (excluding potentially any end-client that is a ‘small business’, in which circumstances the PSC would retain responsibility).
Whilst there are concerns over the simplification of how to decide when IR35 applies, the considerations for the end-client should not differ fundamentally to those which would be applied under the current legislation.
What are Morson doing?
Morson are aware of the proposed changes and indeed have experienced the challenges presented by this legislation when rolled out to the Public Sector April 2017.
The original consultation closed August 10th 2018 and both Morson and our clients and associated Trade Bodies (APSCo and The REC) responded to the consultation document, we now await the detailed consultation from Government to be published. Once we have such detail we will be able to work with both clients and contractors to establish processes and procedures for establishing the tax status associated with the various roles undertaken by our contractors prior to implementation 6th April 2020. We will endeavour to keep all parties updated to ensure a fully compliant supply chain.