IR35 reforms are set to hit the private sector in April 2020 and a lot of contractors are still none-the-wiser as to whether or not it will directly affect them. It can be hard to gauge because to know if it will affect you, you need to know if it will affect the businesses you work for.
We’ve pulled together a quick guide to help you understand if IR35 reforms will affect you or not. However, this is by no means exhaustive and we recommend chatting with your clients as well.
Are you paid by an agency?
As with the public sector reforms, the fee-payer in the private sector will carry the liability for IR35 decisions. This affects a lot of agencies who often pay contractors themselves rather than having the client pay directly.
So, if you get your work via agencies and the agencies pay your fees, then you will be affected by the reforms. This is regardless of the size of the agency a solo recruiter is just as liable as a large recruitment company if they pay your fees on your client’s behalf.
Do you work for a medium or large business?
If the answer is yes then, again, you will be affected by the reforms. This is because the government has decided that only medium and large businesses will need to administer IR35 for now. This is because HMRC believes these are better placed to deal with the ramifications of the reforms and the increased responsibility of making these decisions than small businesses.
But what is a medium or large business? HMRC has categorised this as any company with an annual turnover of more than £10.2 million, or a balance sheet of more than £5.1 million, or more than 50 employees. So, anything above any one of these criteria means a business falls into the medium or large category and so is liable for IR35.
While for some businesses, this is obvious, for others it may not be so you may have to ask more directly whether or not your client will be affected.
What if you work for a small business?
If your client is under all three of the above criteria, the qualify as a small business and will not be responsible for IR35 decisions. This means you still have the power to set your own IR35 status – assuming the client pays you directly and not through an agency.
Of course, HMRC may decide in the future to roll out IR35 reforms to small businesses as well but, for now, you just carry on as you have been. Although it’s worth bearing in mind when you are pitching to new clients that they may be medium or large businesses and, if that is the case, IR35 reforms will begin to affect you.
If you do still have the power to set your own IR35 status, having contractor insurance is a good IR35 indicator. If you need to set yours up, call our expert team on 01242 808740.
