With the 2021 IR35 reforms edging ever closer, now is the time to get yourself prepared, whether you’re a contractor, an end client or a fee payer. So, if you have a burning question that you think should be answered by an expert (free of charge, might we add!), you could do a lot worse than firing it over to Kingsbridge’s Head of Tax, Andy Vessey.
Andy has more than 20 years’ experience working with IR35 legislation and has successfully defended more than 500 IR35 cases. Some of you have already been sending in your questions and Andy has answered some of them right here.
I am over 65 so am no longer liable to pay NI contributions. I obviously pay income tax and tax on dividends etc. so does that mean that IR35 does not apply to me?
There is no age exemption for IR35, and while you do not have to pay Class 1 NIC, you are still liable to pay tax. Unfortunately, therefore, you do still need to consider whether your company’s contracts are inside or outside of IR35.
How likely is it that IR35 will be delayed again?
Unless the country is forced into a severe and lengthy lockdown in early 2021, I think it unlikely that the off-payroll rules for the private sector will be delayed again.
If I get a consultancy job in Europe how will IR35 affect that after Brexit?
Brexit will have no effect on IR35 as you will still need to consider whether your company’s contracts fall inside or outside of the legislation. If you work in Europe and qualify as non-UK resident for a tax year, then IR35 is unlikely to apply as there would be no ordinary liability to PAYE where you are non-resident and the work is performed outside the UK.
I am an independent consultant working through my own PSC. I often work for clients through larger intermediary consultancies. I was working for Company X who were taken over by a risk-averse company who are placing all PSCs inside IR35. Can I insist they do a proper assessment or am I stuck with their ruling?
The off-payroll rules for the private sector are not effective now until 6th April 2021, so it is up to you as to whether or not you accept an ‘inside’ IR35 status determination as your end client would not have deducted PAYE tax and NIC from your company’s fees.
As from 6th April 2021, end clients cannot make blanket IR35 determinations as this is a failure to take reasonable care and they can be held responsible for the deduction of PAYE tax, NICs, and the payment of apprenticeship levy.
However, if the end client chooses to keep the off-payroll rules at arm’s length by only engaging workers via umbrella companies, just like some of the banks and the likes of GSK did last year, then that is their prerogative and unfortunately there is nothing you can do to counter this strategy.
Would I be right in thinking that currently the only way to avoid risk of IR35 tax implications and potential claims for backdated holiday pay etc. from PSC contracts would be to contract with PSCs on ‘contracted out’ scope-based engagements?
Provided that the sub-contracting company is providing a truly contracted-out service, then the end client does not have to consider the off-payroll rules. However, care should be taken that any such service is not simply a labour supply contract dressed up to look like a Statement of Work, otherwise the off-payroll rules can still apply. Another alternative would be to engage contractors via umbrella companies, a strategy favoured by some of the banks and the likes of GSK last year. However, this could have the effect of driving away much needed talent into the arms of competitors.
Does it matter if a PSC is a single person fee earner or multiple person fee earners, i.e. does an SME multi-party approach to contracting offer any protection from IR35?
A company that has more than one employee and different revenue streams would suggest that personal service was not a requirement of the contract and that they satisfied the business on account test, two important status tests. However, a one-person company can equally sit outside of IR35 by applying all the necessary employment status tests.
Please note that I have confined my response from a tax perspective only as the employment law aspect of your question should be directed to a specialist in that field.
How to Ask Andy…
You can send in your own question to Andy right here and he will do his best to answer as many as he can. All details will, of course, remain confidential.
If you’re busy preparing for IR35, remember to check out our IR35 Protect cover, which flexes to protect you, your agencies and your end clients from costs related to IR35 investigations, giving everyone peace of mind and giving you the edge over your competitors.
