Intouch IR35 support – all part of the service
With IR35 2021 around the corner, we’re here to help ensure that you and your hirer continue to work together compliantly and in a way that supports your working arrangements
What is IR35?
IR35 is tax legislation introduced to combat tax avoidance by workers supplying their services to clients/hirers via an intermediary, such as a limited company, or in contracting terms a ‘Personal Services Company’ (PSC), who would otherwise be an employee. HMRC refers to these individuals as “disguised employees”.
If ‘inside’ IR35, you’re considered a permanent employee and will be taxed as such, either via payroll or an Umbrella Company. If ‘outside’ the legislation, you’re considered to be self-employed and will be entitled to structure your remuneration so as to benefit from the lower rates of tax that apply to dividend income.
Trading as a Limited Company and working outside of IR35 can result in higher take-home pay than PAYE or an Umbrella Company agreement, which is why so many contractors prefer to work this way.
Who decides on IR35 status?
In the Public Sector, the end hirer is responsible for assessing IR35 status and bears the tax risk if they get it wrong. In the Private Sector, until April 2021, that responsibility, coupled with the tax risk, sits with the contractor themselves.
However, HMRC has decided to bring the rules around IR35 in the Private Sector in line with the Public Sector from April 2021.
The main change will be that your IR35 status will be determined by the hirer (i.e. your client) and not you, with the associated tax risk also moving to the hirer. The rules used to determine IR35 are not changing so if you’re genuinely outside of IR35 now you should remain outside post April 2021.
However, lack of preparation and knowledge among hirers leading up to this reform could be problematic. Learnings from the Public Sector suggest that some hirers may be overly risk-averse in their assessments and deem more contracts to be inside of IR35 as a result. This proved counter-productive in the Public Sector as contractors were left feeling frustrated, with little option but to stop working on Public Sector projects. The result was a major talent drain and projects put at risk. It’s essential that Private Sector hirers learn from these mistakes and seek expert advice so as to retain their valuable contractor resources.
Services designed with your future in mind – whatever direction IR35 takes
Unlimited IR35 reviews
- Contract and working practices covered
- Practical end-hirer ready output
We understand that IR35 status is a big concern for contractors, with the decision-making power being shifted in April 2021 to the hirer. A move to PAYE or Umbrella could see a drop of 20-25% in your take-home pay. So, at Intouch, we offer unlimited IR35 Contract and Working Practices reviews with practical reports and advice to help you take control.
Although the final decision is out of your hands, you’ll get advice on your contract and working practices in a format that you can easily use for discussion with your hirer. We can even offer legal support to hirers who are struggling to apply the ‘reasonable care’ that’s expected of them by HMRC.
Switch between Limited and Umbrella
- Minimum disruption – just one call
- Finances kept up to date and in one place
If you find yourself temporarily needing to work on a PAYE basis, one of the ways of doing so is through an Umbrella Company – or ‘Professional Employer Organisation’ as they are also referred to (especially in the US). An Umbrella Company effectively creates an overarching contract between you and the hirer and deals with your admin, tax and payroll. The hirer pays your Umbrella Company who deducts their fee, National Insurance and income tax and passes what’s left on to you. You’re effectively taxed as an employee.
With some IR35 turbulence expected in the run up to the April 2021 legislation changes, contractors may find themselves needing the flexibility to switch between their Limited Company and an Umbrella Company and back again at short notice.
Our Flex service gives you the safety net to switch between your Limited Company and an Umbrella Company (if required) with minimum disruption. Flex will keep the daily tasks of your Limited Company active while you use Intouch Umbrella (powered by Brookson). You’ll still have visibility of your finances in the Intouch portal and a direct line to your Personal Accountant. When it’s time to switch back to your company, just let us know – everything will be up to date and waiting for you.
IR35 specialist law firm support
- Advising end hirers to mitigate 2021 impact
- Keeping you up to date with legislation
We’re supported by our group company Brookson Legal – the only SRA regulated law firm that focuses on IR35 for agencies and end hirers. They have been advising on IR35 since its introduction in April 2000 and members of their team have sat on HMRC’s IR35 Forum.
Having advised Public Sector clients on the IR35 changes introduced in 2017, Brookson Legal are ahead of the game when it comes to the April 2021 changes and have an extensive list of existing relationships across the Private Sector supply chain. With their support, we’re actively engaging with agencies and end hirers to ensure that the rules are applied properly and the impact upon contractors is mitigated.
At Intouch, we’re committed to keeping our clients up to date with legislative changes as they develop, while proactively creating services to help protect and support our contractor clients in practical ways. Our relationship with Brookson Legal means that we can always be on the front foot with these developments so you know you’re in safe hands.