{"id":9503,"date":"2021-01-13T17:39:09","date_gmt":"2021-01-13T17:39:09","guid":{"rendered":"https:\/\/acora2021arch.wpengine.com\/?p=9503"},"modified":"2024-05-24T14:52:32","modified_gmt":"2024-05-24T14:52:32","slug":"are-you-ready-for-ir35-here-is-what-you-need-to-know","status":"publish","type":"post","link":"https:\/\/acora.s.nomatter.dev\/nltest\/news\/archive\/are-you-ready-for-ir35-here-is-what-you-need-to-know\/","title":{"rendered":"Are you ready for IR35?"},"content":{"rendered":"<p>On Wednesday 19<sup>th<\/sup> of March 2020, the government announced that the changes to the IR35 tax system were going to be postponed for a year. This decision was mainly made to mitigate the impact of coronavirus on the economy.<\/p>\n<p>Currently, contractors are responsible for determining the IR35 status. However, new government reforms, which come into effect on the 6th of April 2021, will see this responsibility transfer to the contracting organisation. This means that the organisation will also now assume the liability for any underpaid Tax and NI if the Inland Revenue successfully challenges that status in the future.<\/p>\n<p>In view of this significant risk for those who use contractors and freelancers, we strongly believe it is vital for organisations to raise awareness and gain a clear understanding of what IR35 stands for and how it might impact businesses in the near future.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_is_IR35\"><\/span>What is IR35?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>IR35 is a set of regulations that came into effect in April 2000 to try to ensure that freelance contract staff operating alongside permanent employees pay equivalent levels of Tax and National Insurance \u2013 what the Inland Revenue have described as \u201cdisguised employment\u201d.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Who_does_IR35_apply_to\"><\/span>Who does IR35 apply to?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>In line with the small companies\u2019 regime, the IR35 rules apply to all public and private sectors clients that meet at least two of the below conditions:<\/p>\n<ul>\n<li>Your annual turnover is higher than \u00a310.2 million<\/li>\n<li>Your balance sheet total is higher than \u00a35.1 million<\/li>\n<li>You have more than 50 employees<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"What_is_changing_in_less_than_three_months\"><\/span>What is changing in less than three months?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Presently, determining the IR35 status is the responsibility of the contractor. However, new government reforms, which come into effect in early April, will see this responsibility transfer to the contracting organisation. The organisation will also now assume the liability for any underpaid Tax and NI if the Inland Revenue successfully challenges that status in the future. This is a significant risk for those who use contractors and freelancers.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Control_Substitution_and_mutuality_of_obligation\"><\/span>Control, Substitution and mutuality of obligation<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>IR35 involves the application of three main principles, known as the principal \u2018tests of employment\u2019 that help companies determine the IR35 status of their contractors:<\/p>\n<ul>\n<li>Control: what degree of control does the business have over what, how, when and where the worker terminates the work?<\/li>\n<li>Substitution: is personal service by the worker required, or can the worker be replaced by a worker with similar skills?<\/li>\n<li>Mutuality of obligation: mutuality of obligation applies where the employer is obliged to offer work, and the operative is obligated to undertake it.<\/li>\n<\/ul>\n<p>Taking these three principles into considerations, determining whether you will fall inside IR35 is significantly more complex and challenging as there are other factors to take into account. These include contract type, provision of equipment, financial risks and whether the contractor is \u2018part and parcel\u2019 with the organisation.<\/p>\n<p>Here, there appear to be no clear criteria that determine what being \u2018parcel and parcel\u2019 means and whether it should be considered as a secondary criterion to determine IR34 statuses. For example, earlier definitions suggest that employees are \u2018part and parcel\u2019 with an organisation only if they get involved with a business by constantly working within the same team or managing clients.<\/p>\n<p>This example shows how complex land challenging legal decisions towards IR35 statuses can be.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_is_your_next_step\"><\/span>What is your next step?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Without a doubt, the first thing you will need to do as a client is to determine whether your employees fall inside the IR35 reforms by following the above main principles and criteria. Following from this, you should then communicate your determination by using a Status Determination Statement (SDT). This needs to be passed to the worker alongside with your conclusion and reasons behind it.<\/p>\n<p>In addition to this, as a client, you must keep detailed records of your employment status determinations, alongside the outlined reasons and fees paid. On top of this, you will also have put a process in place to deal with disagreements arising as a result of your determinations.<\/p>\n<p>So, what can you do to protect yourself from the upcoming IR35 reforms? And, most importantly, what is the best way to make sure you do not get trapped in ever ending employment status determinations, contract assessments, and disagreements?<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Dont_Panic_%E2%80%93_we_can_help\"><\/span>Don&#8217;t Panic \u2013 we can help!<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>If you use our flexible managed resource service, already a superior alternative to using contractors, you are exempt from the liability of any assessment or tax underpayments resulting from the IR35 changes.<\/p>\n<p>As a <a href=\"https:\/\/acora.com\/our-services\/\">managed service provider<\/a> with a 30-year track record, we would recommend acting sooner rather than later.<\/p>\n<p>If you are looking for an immediate solution, you can reach our Head of Support Services, Benjamin Whitehead, at\u00a0<a href=\"mailto:benjamin.whitehead@acora.com\">benjamin.whitehead@acora.com<\/a> or you can\u00a0<a href=\"\/contact-us\/\">book a discussion here.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>On Wednesday 19th of March 2020, the government announced that the changes to the IR35 tax system were going to be postponed for a year. This decision was mainly made to mitigate the impact of coronavirus on the economy. Currently,&#8230;<\/p>\n","protected":false},"author":16,"featured_media":10484,"comment_status":"closed","ping_status":"open","sticky":false,"template":"full-width-single-post.blade.php","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-9503","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-archive"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.5 (Yoast SEO v27.5) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Are you ready for IR35? - Acora NL Test<\/title>\n<meta name=\"robots\" content=\"noindex, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Are you ready for IR35?\" \/>\n<meta property=\"og:description\" content=\"On Wednesday 19th of March 2020, the government announced that the changes to the IR35 tax system were going to be postponed for a year. 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