Proposed reforms to off-payroll rules which are due to come into force in April next year would mean that end hirers become responsible for determining your IR35 status.
Furthermore, the liability for unpaid tax would sit with the organisation that paid your limited company, then the top agency in the chain supplying you as a worker to the end hirer.
This would be a challenge for end hirers who have never had to undertake status assessments before. It would also be a challenge to agencies which would be liable for unpaid tax (even though they would not be responsible for the initial status assessment). Contractors will have to see how their end hirers and agencies respond to the new legislation, if it is introduced.
Under the current rules, you as the contractor are completely responsible for working compliantly and paying the correct taxes.
If the assignment is later judged not to be outside IR35, you are liable for the unpaid tax plus any penalties and interest levied.
Under the new rules, your end hirer would be responsible for IR35 assessment and would have to issue what is known as a Status Determination Statement (SDS) to the agency and to you, the contractor.
In theory, if the end hirer issues an ‘inside IR35’ SDS then they will have complied with their obligations. If your agency (and any other agencies in the supply chain) then ensure that you are paid via PAYE and taxed as a normal employee (eg. via a compliant Umbrella company) then there would be no liability or risk for anyone.
If the end hirer issues an ‘outside IR35’ SDS, then an agency would be liable for tax if the status is successfully challenged.
How might agencies mitigate their risks?
Agencies and end hirers have a number of options available to them which would help to mitigate risks. These include:
- To use insurance-backed IR35 assessment tools to enable the continued use of limited company (PSC) contractors.
- To require contractors to switch to a compliant Umbrella company.
Our parent company, JSA Group, offers FCSA-accredited Umbrella services and has formed a strategic partnership with Qdos which provides insurance-backed assessment tools.
Here to help
As specialist contractor accountants with many years of experience in IR35, we are here to help you navigate the proposed off-payroll rules.
If you are a limited company (PSC) contractor who is likely to be affected by the off-payroll rules, you can contact our account teams for more information and support.
We can also provide support to your end hirers and agencies via our parent company, JSA Group. IR35 Complete from JSA is our holistic suite of solutions which are designed to help mitigate the risks associated with the off-payroll reforms.
Please contact us to find out more.