If your business engages off-payroll workers, it's essential to be familiar with IR35 and its potential impact on your operations.
IR35 – what is it?
IR35 is a tax legislation aimed at ensuring that workers pay the appropriate amount of tax and National Insurance contributions (NICs). The regulation applies to workers providing services to clients through intermediaries like limited companies, who would be deemed employees if they were working directly for the client.
Implications of IR35 for you
As an employer who works with individuals through intermediaries, you need to determine if the worker should be classified as an employee for tax purposes.
Typically, as the client, you are responsible for establishing the worker's employment status. This can be done using the Government's Check Employment Status for Tax (CEST) tool.
If a worker is classified as an employee, you are responsible for deducting Income Tax and NICs from their pay and contributing employer NICs.
To make an accurate determination, you should consider factors like the worker's level of control over their work, any exclusivity requirements, and their integration into your business.
Additionally, you must create a Status Determination Statement (SDS) outlining the reasons for the worker's tax treatment.
Ensuring compliance
To guarantee compliance with IR35, conduct a comprehensive review of your engagements with workers who provide services through intermediaries.
This process involves identifying workers who may fall under IR35 and assessing their employment status. You might also want to review your contracts with workers to ensure they align with their assigned employment status.
Communication with your workers about any changes to their employment status and potential impact on their pay and benefits is crucial. This approach helps facilitate a smooth transition and avoid misunderstandings or disputes.
Navigating the complexities of IR35 can be challenging, and non-compliance may result in penalties and fines. We provide support to help you make informed decisions and take the necessary steps to comply with IR35.
If you require assistance in meeting your IR35 obligations, please get in touch.