IR35 Checklist: What do you need to do before April 2021?
IR35 rules make sure that workers, who would have been an employee if they were providing their services directly to the client, pay broadly the same tax and National Insurance contributions as employees. Originally planned to take effect from 6 April 2020, due to the COVID-19 outbreak, the legislation has been delayed, now due to come into force April 2021.
If you engage sub-contractors regularly, you can to use our checklist to help you prepare for April 2021. If you find yourself in this situation, then complete a Status Determination Statement (SDS) about this engagement.
Some companies may benefit from exemptions, but in our experience, it is prudent to obtain an SDS and to review them every 6-9 months, and keep a copy of the latest findings on file until your next PAYE inspection.
Always be honest with yourself as it is a good indicator of how a sub-contractor would be treated in terms of Employment Law and Tax. This should be completed on a case by case basis for each sub-contractor, but can also be used as a general guide.
With the potential for hefty financial penalties for non-compliance, businesses who haven’t yet prepared for these regulation changes must put procedures in place to ensure that everything is in order before April.
Here are five questions that you should consider to get ready for the new IR35 legislation:
- Does the sub-contractor have the opportunity to earn more by working effectively, i.e. they work on a fixed price (not day rate) and can influence the way in which they work?
- Does the sub-contractor have a business plan with cash flow forecasts, with a business bank account into which they are paid?
- Is the sub-contractor responsible for rectifying its own mistakes, errors or omissions?
- Has the sub-contractor, in the past 2 years, been unable to recover more than 10% of their income due to their mistakes, errors or omissions or because the end-user has failed to pay?
- Can the sub-contractor send someone else to do their work?
Related Reading: IR35 and What to Consider When Using Labour Only Sub-Contractors
If you are impacted by IR35, our team can help. With some changes to your contractual and working practices, you could become IR35 compliant. Call one of our Employment Lawyers on 03456 122144.