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With only a few months to audit your business, change contractor engagements and satisfy IR35 compliance obligations, the time to 6 April 2021 looks a busy one for those wanting to avoid substantial tax bills and potential penalties.
How prepared is your business for the IR35 tax reform?
IR35 assessments are relevant where an individual contractor is paid in a tax efficient manner through an intermediary, usually a personal service company (the contractor's own LTD company).
Currently, the responsibility for determining the tax status of the contractor and the resultant tax liabilities typically rest with the contractor's own personal service company.
In brief, from April 2021, the assessment responsibility will pass to the hiring company, and whoever pays the contractor's personal service company (often recruitment or umbrella companies in the chain) will bear responsibility for any relevant tax, NICs and apprenticeship levy liabilities. There are exceptions where the hiring company is small enough to be exempt or based wholly overseas. In those cases, the current regime (with the risk sitting with the contractor's personal service company) continues to apply.
So, whatever role your organisation has in the recruitment chain, you will need to consider how it might be affected and review your arrangements to ensure you are ready for April 2021. Any relevant contracts with an end date beyond April 2021 will have to take account of the new legislation now.
Our fixed-cost due diligence assessment tool enables you to review your contractor arrangements against the relevant employment status factors tested by HMRC and the courts. It also includes a template status determination statement, written guidance on how to use the tool and time with our lawyers to help you with the process - all part of the fixed-cost.
At the end of the initial audit, you'll receive a gap analysis report with recommendations on the changes needed to work towards IR35 compliance and avoid "inside IR35" / deemed employment results.
To see our latest IR35 webinar - Don't leave it too late this time! Get started on your audit programme before Xmas.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.