what is IR35?

  • IR35 is the common name given to the intermediaries legislation. That is the legislation governing the tax status of individuals who provide their services through an intermediary such as a limited company (commonly known as a personal services company or a PSC).

IR35 changes explained — from contractor to client.  

For the public sector, IR35 is almost old news, with changes implemented back in 2017. Turn to IR35 in the private sector and there’s a wealth of unanswered questions and confusion. Originally set to come into effect from April 2020, the implementation of IR35 legislation, now in force, was postponed until 6th April 2021, due to the coronavirus pandemic.

IR35 changes explained. 

  • IR35 changes came into force on 6th April 2021

IR35 is a set of tax reforms first unveiled in 1999 by the Inland Revenue. The reforms force medium and large businesses in the U.K. to determine if the IR35 rules apply to their contractors and freelancers. Previously this was determined by the contractors themselves.

The new legislation was designed to enable more effective enforcement of existing rules, shifting the compliance burden to clients. For example the change will allow HMRC to pursue one company in respect of 200 contractors, rather than carrying out 200 individual contractor investigations. 

IR35 targets individuals that provide their services via an intermediary, most commonly a limited company.

The responsibility for making this IR35 determination falls to the end-user of the services (typically employers that engage contractors). The organisation paying for the services will be responsible for making the relevant deductions.

IR35 is here… are you set up?

The HMRC has the authority to investigate the tax compliance of organisations, and this will allow them to explore the employment status of any off-payroll workers providing their services to private sector clients.

Where it is found that an individual has been incorrectly categorised as being outside of IR35, the HMRC will issue a determination requiring the unpaid PAYE tax and National Insurance Contribution liabilities — including any late payment fines and interest — to be paid.

In addition to these fines, HMRC have the discretion to issue a penalty ranging from 0-100% of the initial outstanding liability. If an incorrect determination has been made in the absence of reasonable care, it is likely that a severe penalty would be awarded alongside the unpaid taxes.


The affects of IR35 on your business

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how can randstad help?

  • By ensuring best practices and IR35 compliance for both our clients, and as a market leading managed service provider (MSP)
  • Providing trusted subject matter expertise and guidance
  • Offering tailored solutions fit for any business 
  • Simplifying complex processes, unravelling jargon and ensuring clear understanding
  • Let your hiring managers focus on their day jobs, let us take the strain of IR35