Contractor IR35 options: Act now for peace of mind
As the April deadline for rolling out new IR35 rules in the private sector draws closer, an increasing number of contractors have already received their status determination statement, with more expected in due course.
Whether you have been deemed inside or outside of the off-payroll working rules – or perhaps you haven’t yet received your determination – Morson is here to help.
We offer a suite of IR35-compliant payroll solutions ranging from Pay As You Earn (PAYE) via Morson to several FCSA-accredited Umbrella companies.
If you are currently operating via a personal service company (PSC), it is important that you understand your options and the various routes available that ensure you remain compliant with the new rules.
Don’t leave it to the eleventh hour - be proactive and avoid the rush by discussing your IR35 options today.
Cutting out the jargon: A simple guide to IR35
What is IR35?
Legislation introduced by the government in 2000 designed to close what was considered to be a potential loophole, allowing individuals to set up an LTD company with the sole aim of paying less Tax/National Insurance than regular full-time employees.
Is something changing I need to know about?
Yes. From April 2021 the legislation will be revised. The key change to be aware of is that the responsibility for determining whether an individual contractor is operating inside or outside of IR35, will move to the end-client the individual works for rather than being left to the individual themselves to decide their own tax status as per the current version of the legislation.
What will clients need to do?
Clients will need to make an IR35 determination on your role before the start of April 2021 and will need to inform both you and Morson directly of their determination outcome. This determination, presented in the form of a status determination statement (SDS) will either confirm you are Inside IR35 or Outside IR35.
What does inside IR35 mean?
This means the client has determined that the role you carry out is deemed to be similar to that of an employee of their business for tax purposes only and needs to be treated as such. If the client determines you are inside (or in the scope of) IR35, you will need to consider alternative contract payment options if you want to continue working for that client beyond 6th April 2021. This will mean looking into one of the below payment models via Morson.
What does outside of IR35 mean?
This means the client has determined that the role you carry out is truly self-employed for tax purposes. If the client determines you are outside (or out of scope) of IR35 you can carry on operating through your LTD company and can continue to manage your own tax affairs in the most efficient way. You will still need a new contract to confirm the clients outside IR35 determination from April 6th 2021 but nothing else will change.
Morson Group Umbrella Company PSL
Morson Group PSL providers are all engaged in an overarching agreement with associated indemnities and warranties. They are assessed for financial stability, ownership is sanction checked, RTI reports are provided and we conduct regular audits. In addition, all workers are engaged on a PAYE contract of employment. These providers need to be a member of the FCSA or Professional Passport accredited. With the Morson Group PSL we offer full compliance and avoid some of the umbrellas that are springing up which put workers at future risk.
Whilst some umbrellas may claim to be HMRC audited this isn’t a badge of approval from HMRC, as HMRC will not endorse any company. We only engage with FCSA or Professional Passport accredited umbrella providers, this ensures they are financially stable as well as compliant with all relevant legislation. However, there are a lot of schemes designed to avoid Income Tax and National Insurance contributions (NICs), through a combination of capital advances and complex offshore joint (or mutual) share ownership arrangements. These schemes may also offer tax-free T&S, which again is subject to the intermediaries’ legislation in respect to SDC, and generally put the worker at personal financial liability. Part of our due diligence includes assessing some of the symptoms of aggressive scheme promoters such as:
Directors with a history of phoenixing companies
Directors with hundreds of small companies under them
Companies registered offshore e.g. Philippines, India, and the Isle of Man
Payslips for an agency using different PAYE references
‘FREE’ schemes – i.e. no margin charged to the worker, high take-home pays promised
Whilst we appreciate the financial impact on workers of being deemed in scope of IR35, we have a duty to ensure all parties in the supply chain, and more importantly, the actual workers, are protected from the risks associated with non PSL umbrella providers. HMRC is very firm on this within their guidance and FCSA accreditation is industry-accepted compliance by the REC (Recruitment & Employment Confederation). Furthermore, we are also governed by The Criminal Finance Act (as amended September 2017).
Our list of approved umbrella suppliers below can help you gather comparative quotes or please visit https://www.tax.service.gov.uk/estimate-paye-take-home-pay
Click here to visit our IR35 Hub to see our list of approved umbrella suppliers
Together with our network of approved suppliers, we are here to guide you through whichever option you choose.
Act now to gain the peace of mind that comes with knowing your IR35 affairs are in order.
For further advice, please contact your Morson representative or our central IR35 support team at IR35@morson.com or visit our IR35 Hub
