From April 2020, changes to the IR35 legislation will come into effect that will have an impact on the way businesses engage contractors.

IR35 is a piece of tax legislation that is designed to tax ‘disguised employment’ – that is when an individual engages with a business through a third party, such as a personal service company (PSC) and in so doing receives tax benefits that they wouldn’t be able to enjoy if they were an employee.

Currently in the private sector, it is the role of the PSC to determine whether the individual falls in, or out with, IR35 and to pay any increased tax but from April 2020 that assessment obligation will sit with the business that engages the contractor and the tax will need to be paid by the “fee payer”.

In short, this means that the changes to IR35 will shift the compliance burden on to the business that engages the contractor.  It is also likely to increase cost. Should contractors be treated as employees for tax purposes, then the business which pays the PSC will be responsible for the tax burden. The changes to IR35 will have implications for medium to large businesses across all sectors particularly oil & gas, IT, financial services and construction.

In planning for the changes to IR35 businesses should act now.  It is important to remember that it is not just an HR, tax or legal issue. It is a people issue that requires to be looked at through multiple lenses, and that's exactly how our cross specialist team here at Brodies approach the IR35 challenge.

Our team will help you to identify the impact of the new rules for your organisation and work closely with you through the various stages of preparation from identifying the contractor population, reviewing arrangements with employment businesses, assessing and communicating contractor status   - working with you to determine the best solution for your business. Our team can support you with communication around the changes and any training required so that you have the correct processes and procedures in place going forward.

 


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