Ever wondered if changing your company status will help avoid the IR35 reforms? Or perhaps you’re wondering if it’s beneficial to your IR35 status to take on an employee? Maybe you’re pondering what to do in the event of a client making a blanket determination? Whatever IR35 questions are on your mind, Andy Vessey (Kingsbridge’s Head of Tax) has the answers.
With more than 20 years of experience with IR35 legislation, and around 500 successfully-defended cases under his belt, Andy is the best person to answer your IR35 conundrums. Here he answers some of those received in the last week.
If I change my company status from LLM to LLP, does this avoid the tax obligations of IR35? In other words, if I have multiple clients but only one is a full-time role (the others are worked on during evenings and weekends) can you then argue IR35 is irrelevant?
Partnerships (including LLPs), like companies, are within the ambit of IR35. Having multiple income streams helps to demonstrate that you are genuinely in business on your own account and, therefore, is a pointer towards self-employment. However, HMRC will seek to isolate your full-time contract and so it is necessary to consider all the usual employment status tests to ascertain its IR35 status. This will require an examination of your contractual and working arrangements which Kingsbridge would be more than happy to assist you with.
I’m about to finish one contract and start a new one with a new company but the same end client. I’ve also taken on another employee for six months of this year who worked for a different company and a different end client under my PSC. Will these factors (multiple employees with multiple companies and end clients) provide good evidence and aid my IR35 status if challenged?
Engaging other workers to work on simultaneous contracts will be a strong indicator of you being genuinely in business on your own account and, therefore, a strong pointer towards self-employment. In short, this will be very good evidence in an IR35 defence.
Some consultancies are adopting an approach of all contractors being inside IR35 without even carrying out an assessment. What is the best course of action when an independent assessment shows otherwise?
It is acceptable for an end client to make a determination for a group of workers, providing those workers are engaged under the same contractual terms and conditions and, in practice, work under the same terms and conditions. However, if determinations are made for groups of workers where the terms and conditions are not the same, this would not be seen as taking reasonable care. If the client has not taken reasonable care, the responsibility for the deduction of tax and NICs, and payment of apprenticeship levy, and paying these to HMRC belongs to the end client. This is the case even if another party has already made deductions in line with the original determination.
The legislation requires clients to have a status disagreement process in place to deal with disputes around Status Determination Statements (SDS) by workers and deemed employers (typically an agency).
As a minimum the legislation requires the end client to:
– Consider the worker’s and/or the deemed employer’s representations. These representations could be made verbally or in writing.
– Respond to the worker’s and/or the deemed employer’s representations within 45 days, beginning with the day the representations are received, not from when the SDS was issued.
Inform:
– The worker and/or deemed employer that it has considered their representations and decided that its original SDS was correct and provide reasons, or
– The worker and/or deemed employer that it has considered representations and decided the original conclusion was wrong, provide a new SDS with the date this new SDS became applicable and state that the previous SDS is withdrawn.
– Take reasonable care in making any new SDS and ensuring it contains the reasons for reaching that conclusion.
If an SDS is issued prior to 6 April 2021, a worker or deemed employer can make representations before 6 April 2021 if they wish, but the 45-day time limit will only begin from 6 April 2021.
How to Ask Andy…
If you have an IR35 question of your own and would like Andy to answer it, you can submit it using our simple form. Andy will answer as many questions as he can right here on this blog.
Remember, if you’re in the midst of preparing yourself for the IR35 reforms, it could be worth considering our IR35 Protect insurance packages. The cover flexes to insure whoever holds the tax liability in the contractor supply chain. Right now, that’s you, but after 6 April 2021, that will be whoever your fee-payer is, whether that’s the end client or recruiter.
So, the cover takes away the risk from all concerned and makes you a much safer bet in terms of IR35.
