From April 2021, off-payroll working (IR35) legislation is changing, impacting payroll processes for large private employers, recruiters and contractors.
What is IR35?
IR35 is a piece of tax legislation introduced by HMRC in 2000.
The aim of the legislation was to ensure the correct amount of tax and national insurance is paid. The intention was to assess the duties of contractors, to ascertain who should be paid as employees, as opposed to those who are genuinely self-employed.
An assignment is either ‘inside IR35,’ where the duties are like an employee so PAYE deductions must be made, or ‘outside IR35,’ where the duties are not like an employee, so PAYE deductions do not need to be made. This status must be reviewed on a contract-by-contract basis.
What does this mean for recruitment agencies?
If a recruitment agency has an active a temp/contract desk, then it is highly likely that a number of its contractors will be affected.
As referenced in the Government’s recent finance bill, the ‘end client’/‘hirer’ will be responsible for assessing whether an assignment is inside or outside IR35. If they get it wrong, they will also be responsible for the for any tax shortfalls.
As relieving as this news may be, the thought of extra administration and added employment responsibility still comes as a burden to many recruitment professionals. Therefore, many recruiters are looking to outsource the employment of their contractors.
What does this mean for contractors?
After the public sector IR35 changes, there was a clear increase in tax avoidance schemes. This is a predictable part of the aftermath of the off-payroll working reforms and therefore another surge should be expected.
If you are affected by the changes in legislation this time around, then it is imperative that choose a compliant and trustworthy employment solution.
We at Exceed Outsourcing have a range of compliant solutions that are suitable for all assignments Inside IR35:
Exceed Umbrella (Outsourced Employment)
- The most used PAYE solution with minimal admin and lots of additional benefits.
Exceed PEO (Joint Employment)
- Combines the simplicity of outsourced payroll with the benefits of our umbrella solution.
- This is especially attractive if you have a requirement for VAT exempt supply, or you would like to reduce your factoring costs.
Payroll and HR Bureau
- Employ workers on your own payroll
- Leave the administration to us
