The new IR35 rules will be coming into place in April 2021, in some instances passing the responsibility of assessing a contractor’s employment status for the purpose of tax onto the organisation engaging their services.
Having undertaken the assessment as to whether the IRS “off-payroll worker” rules apply, the organisation must relay their decision on a Status Determination Statement (SDS) to any relevant intermediary (eg, the contractor’s agency) and the contractor themselves so that tax and NI contributions are deducted from the individuals’ pay if applicable.
Companies affected by the new rules must also ensure that their internal and external processes are ready for the changes ahead of 6th April.
Among other measures, these organisations should:
• Ensure that their finance, HR and recruitment managers understand the changes and their impact on the organisation.
• Decide who within the organisation will be undertaking status decisions in respect of current and future contractors.
• Assess the status of all current and incoming contractors (whether they are engaged directly or through an intermediary)
• Liaise with their (internal or outsourced) payroll and finance departments to decide how contractors will be paid and whether a separate payroll system should be prepared.
• If they are not the fee payer, liaise with any intermediary in the supply chain who is responsible for paying the contractor to ensure that they are aware of the status determination and, if the off-payroll rules apply, will deduct tax and NI from the consultant’s wage.
• Set up a process by which disagreements about the employment status determination can be considered (this is a legal requirement); and
• Set up a robust audit trail (it is a legal requirement to keep records).
If you would like assistance in respect of the new rules and/ or regarding making status determinations, please do not hesitate to contact our employment department.
Kate Payne,
Payne@elbornes.com
Melanie Cotton
Cotton@elbornes.com
+44 (0)20 7320 9000
