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With the private sector IR35 reforms only two months away (and with little chance of being delayed again), Kingsbridge’s Head of Tax, Andy Vessey, is back to answer your questions on the reforms and what they mean for contractors.
Andy is the expert in IR35, having been involved with it since it first appeared 21 years ago. He’s defended more than 500 IR35 cases for contractors and has won almost every single one, so what Andy doesn’t know about IR35 isn’t worth knowing. This week, he’s answering questions on the reliability of CEST, what working outside the UK can mean for your IR35 status, and how the public sector will be affected by the private sector reforms. Read on for all of the answers…
If your end client has issued a Status Determination Statement saying you are outside IR35 based on the CEST tool (and have not sought the advice of a third party such as the Kingsbridge IR35 Status Tool), is this something you can rely upon post-April 2021? Or would you recommend the end client should undertake a separate assessment to be sure?
It’s worth noting that my contract has also been given a pass as outside IR35 by a third-party tax specialist.
The onus is on your end client to take ‘reasonable care’ when making the status determination and issuing the SDS. Providing they have done this and have answered the CEST questions accurately, then HMRC will stand by the result of its own tool. If you, therefore, concur with the determination, I see no reason for you to seek any further opinion as it is not your responsibility and you hold no liability.
I am a UK contractor working for a German engineering company for over two years. I believe it is quite clear that I am self-employed, but is there any possibility that I could be exposed to IR35 or other tax liabilities?
If you, the worker, are a non-UK resident for tax purposes, regardless of where your company is situated, then IR35 will not be an issue. However, if you are a UK resident taxpayer, then it is necessary to consider if IR35 applies to your PSC’s contract with the German company. You therefore need to consider both the contractual arrangements and working practices to help you reach that decision. If you decide that the contract falls outside of IR35, then you should document your reasons for presentation to HMRC should they ever challenge you.
In respect of any exposure to German taxes you need to consult an adviser who specialises in German taxation.
Currently the public sector are already working within the new IR35 regulations. With the regulations coming into force for the private sector on the 6th April, how will the public sector be affected, if at all?
Other than the private sector requirements for the end client to be a medium or large-sized company, the new rules will apply equally to a public sector body for payments made on or after 6th April 2021. Public sector organisations must therefore ensure that they take reasonable care in reaching decisions about a worker’s employment statuses, and that a valid Status Determination Statement is passed to the worker and any third party it contracts with. They will also need to put in place an appeals process should the contractor and/or the contractor’s agency disagree with an SDS. Like their private sector counterparts, they will need to reply within 45 days, even if they do not change their decision.
How to Ask Andy
If you have your own burning question on IR35, you can put it to Andy yourself using our online form. He’ll do his best to answer right here on our blog.
If you’re wondering about your own IR35 status, or you want to direct your end client towards a way to confidently produce your SDS, the Kingsbridge IR35 Status Tool is at your disposal. Developed by Andy Vessey, the unique tool asks between 29 and 34 carefully constructed questions around your contract and working practices to take a full 360 view of your IR35 status. If your case is clear one way or the other, you’ll receive an instant determination plus a comprehensive, downloadable report that goes through your engagement and shows you where you case is strong, or where it could be improved.
If your case is borderline, it is handed over to one of our (human) IR35 specialists in-house at Kingsbridge. They will perform a manual review to ensure there is no confusion. We’re currently the only provider to offer a hybrid solution like this and you or your client can take advantage of it for just £50 plus VAT, giving you both confidence that the right decision has been made and there will be no repercussions further down the line.
