Until now, it has been the responsibility of individuals providing services to companies through a Personal Service Company (PSC) to assess their own tax status and account to HMRC. From April 2020, under new IR35 rules, this will change. The company that engages and pays the PSC will become responsible for determining the tax status of individuals who provide services in this way.
Businesses will have to consider, on a case by case basis, whether or not an individual providing services through a PSC would be employed by them if the PSC was not in place. If so, the arrangement will be 'within IR35' and your business must:
- Deduct income tax and employee's National Insurance Contributions (NIC) (via PAYE) from the fees paid to the PSC; and
- Pay employer's NICs.
It is proposed that the outcome of the status determination must be provided to the individual (and the fee payer in a chain) together with reasons if requested, and that the determination can be challenged.
The new rules are likely to have significant implications – both financial and structural – for many organisations. It is important that businesses act promptly, to ensure they have sufficient time to review their arrangements and take action to ensure compliance by the deadline of April 2020. Carrying out an audit will provide you with detailed assessment of the risks to your business, support navigating the risks and advice on next steps. Through our IR35 Audits, we can:
- Identify the PSCs which your business engages directly or via recruitment agencies
- Determine their employment status and whether they will fall within the reformed IR35
- Formulate reasons for each determination
- Advise you on the risk
- Develop an action plan and advise on alternative engagement models if appropriate
For more information on our IR35 audits, please contact Åsa Waring.