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IR35 - What does it mean for you?

6 September 2019

Business Tax

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The IR35 tax rules attempt to ensure that contractors providing services via their own personal service companies (PSCs) pay broadly the same amount of tax as if they were employees. Until recently PSCs providing services into the private sector have had to self-assess whether IR35 applies. This is expected to change from April 2020; the new rules are currently in the draft legislation stage.

Who do the rules effect?

The new rules apply where the End Client is a large or medium sized company as set out in the Companies Act 2006.

What are the new rules?

The rules envisage 2 parties:

The “End Client” – The organisation that receives the services from the PSC, who will be responsible for deciding whether the contractor arrangement falls within the new rules.

The “Fee Payer” – The organisation which must ensure the correct tax is paid. They are usually the party who provides payment to the PSC.

In many cases these two parties will be the same organisation – but this is not always so.

The End Client must:

  • ensure that a Status Determination Statement (SDS) is drawn up before the commencement of any activity involving a PSC. If this document is not prepared by the End Client, they then must take on the liabilities associated with being the Fee Payer – if they are not already.
  • once the SDS has been created it must be issued to those who are next in the chain under the contract, (if anyone), and also to the PSC contractor.
  • implement a disagreement process which will allow the PSC to register any objections they have to the SDS

How can we help?

Whether you engage with PSCs , or you provide your services via a PSC, we recommend that you review your IR35 position as soon as possible, well ahead of the deadline. Our experienced tax team has regularly advised on IR35 matters since its introduction in 2000. If you want to talk to us about how the new draft legislation might affect your business then we would be happy to help.