What you need to know about the off-payroll working (IR35) rules’ change
What is IR35?
IR35 is the new UK tax legislation designed to combat tax avoidance by companies and contractors who could use the set-up of an intermediary company in order to pay less tax.
It specifically targets situations where a contract exists between two companies, the contractor’s intermediary and the end client, when, in reality, the work relationship would be classed as employment for tax and National Insurance purposes.
The IR35 rules make sure that contractors, who could be classed as direct employees of the end client, pay broadly the same amount of tax and National Insurance contributions as all other employees.
Who the IR35 rules apply to?
You may be affected by IR35 rules if you are:
- an independent contractor who provides their services through their intermediary (e.g. Limited Company or a personal service company)
- a company who receives services from a contractor through their intermediary
- an agency providing contractors’ services through their intermediary
- From 6 April 2020, the rules will apply to medium and large-sized private sector companies, including charities, that meet two or more of the following conditions:
- you have an annual turnover of more than £10.2 million
- you have a balance sheet total of more than £5.1 million
- you have more than 50 employees
What you need to do as a company
The good news is that, as long as you hire your flexible staff through Coople, you don’t need to do anything! We, Coople, are the employer of our flexible workers. You are our customer.
For your other temporary workers and contractors, you’ll need to determine the employment status of each one. You’ll need to:
- pass your determination and the reasons for the determination to the worker and the person or organisation you contract with
- make sure you keep detailed records of your employment status determinations, including the reasons for the determination and fees paid
- have processes in place to deal with any disagreements that arise from your determination
If you are also the fee-payer and the off-payroll working rules apply, you will need to deduct and pay tax and National Insurance contributions to HMRC.
Small-sized companies in the private sector will not have to decide the employment status of their contractors. This will remain the responsibility of the contractor’s intermediary.
What is changing as of April 2020?
The off-payroll working rules have been in place since 2000. In 2017 the government added a reform of the operation of the rules in the public sector which extends the rule to all medium and large organisations as of April 2020. This change will make the organisation that engages the contractor responsible for operating the rules, meaning the organisation must deduct taxes and National Insurance contributions from fees and pay them to HMRC.
As part of a review into these changes, on the 7th January 2020, HMRC made an announcement to give businesses more time to prepare. Changes to the operation of the off-payroll working rules will only apply to payments made for services provided on or after the 6th April 2020, HMRC announced on the 7th February 2020. It means organisations will only need to determine whether the rules apply for contracts they plan to continue beyond the 6th April 2020, supporting businesses as they prepare.
On 28th February a ‘light-touch approach’ was announced. HMRC will not place penalties on any person or company with inaccuracies relating to off-payroll working rules during the first year of the roll-out. If anyone deliberately fails to comply, then they can still be charged.
Is Coople for you?
Overwhelmed by the IR35 rules’ changes? A lot of companies are deciding to let companies like Coople deal with the admin and extra work of hiring staff directly.
Coople, Europe’s largest on-demand staffing platform gives you access to more than 100,000 staff in the UK to fulfil the vacancies you need when you need them without any setup- fee, from receptionists and telesales to hospitality staff and warehouse assistants.
Coople’s platform matches your jobs with skilled workers. You can also build a pool of favourites and hire them whenever you need them.
Unlike other agencies, Coople puts you in charge of hiring the right workers at the right time. Using an online account or the app, you can create jobs that reach thousands of fully vetted workers with the skills you need. That means you get:
- Staff to cover large bookings or covers
- Skilled staff for last-minute absences
- Efficiencies, don’t lose revenue due to overstaffing/understaffing
Here are some government resources to find out more: