IR35: bringing you up to speed.

IR35 changes - from temp worker to client.  

For the public sector, IR35 is almost old news and has been enforced since April 2017. Turn to IR35 in the private sector and there’s a wealth of unanswered questions and confusion.

On the 17th March, Chief Treasury Secretary Steve Barclay announced the Government's decision to delay the implementation of the IR35 legislation by 12 months, with changes now coming into effect from April 2021.

Come spring 2021 when IR35 will come into play, temporary/shift workers and clients need to be ready for the new IR35 rules and, for organisations, now is the time for preparation to begin. Randstad is here to help and share our experience of carefully navigating the private sector through the IR35 changes. 

what is IR35 and what are the changes? 

IR35 is a set of tax reforms first unveiled in 1999 by the Inland Revenue. The reforms will force medium and large businesses in the UK to set the tax status of their shift and temporary workers. Previously this was set by the workers themselves.

New IR35 legislation proposed to be introduced in April 2021 to the private sector is designed to combat tax avoidance. It targets individuals providing their services via an intermediary, most commonly a limited company. Under the current IR35 rules, these individuals assess each contract and determine whether IR35 applies. When it does, income received from that contract should be treated as employment income. This means it’s subject to tax deductions and national insurance contributions.

From April 2021, the responsibility for making this IR35 determination will fall to the end-user of the services (typically clients hiring temporary workers). The organisation paying for the services will be responsible for making the relevant deductions. As of February 7th, HMRC announced that IR35 would only apply to payments made for services provided on or after April 6th 2021. 

spotlight on IR35 changes in public services. 

Whilst the new rules impact a significant proportion of the private sector, the public sector has already been through these changes in 2017, so it will be business as usual for our education, care and student support temporary workers and clients. To find out more about the IR35 changes and who they impact, we’ve created a helpful IR35 guide to support organisations ahead of April 2021. It covers everything from ‘what is IR35?’ to the IR35 changes and the HMRC tool to top tips.  

IR35 changes for temporary workers. 

We’re often asked what the impact of the new IR35 rules will have on private sector workers, especially when it comes to their wage packet. The legislation needs to be finalised for 2021 but it’s helpful to know that, as a guideline, workers in scope of the IR35 rules may see a 10-20% reduction on their take-home pay. 

is IR35 the end of shift workers?

IR35 is the end of avoidance of taxation, not temping. Fears around the impact of IR35 news on the rule changes set for April 2021 may result in some companies to halt the hiring of PSC contractors. However, most will simply put their current contractors under more scrutiny in line with the new guidelines.

a soft IR35?   

In year one Chancellor Rishi Sunak has noted the HMRC will not be heavy-handed in their approach to the IR35 changes come April 6th. From a questioning session in Birmingham during February 2020, Sunak attempted to reassure companies and freelance contractors of a soft approach in the first year. In an attempt to avoid 'disguised employment' and higher PAYE rates, the treasury sees both freelancers and employers attempting to game the system and look to re-gain a projected £3billion over the next four years. 

This information was correct at the time of being published (March 2020). Randstad always recommends that clients secure independent legal advice when preparing for the IR35 rules. 

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