The Institute of Construction Management | |
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IR35 off-payroll working rules came into force on 6 April 2021 |
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As the UK unlocks and more return to work, all are urged they should urgently review the impact that the changes to IR35 are likely to have on their own employment and engagements with contractors and agencies they may work with or be employed by under contract of employment ... |
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Initially started in 2000, the IR35 tax rule is essentially an anti-avoidance tax rule designed to target the use of Personal Service Companies (PSCs) to avoid employment taxes ─ much of the construction sector works in this way! and broadly, is where an individual is engaged ‘off-payroll’ and through a PSC, the PSC contractor can achieve employment tax savings, while the engaging business is not required to pay employer National Insurance contributions, currently at 13.8% ─ with IR35 when a business engages an individual through an intermediary such as a PSC, if the individual would have been considered to be an employee for tax purposes if they had engaged directly with the business, then the individual should be taxed as an employee. |
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PREPARE FOR IR35 CHANGES DESPITE COVID-19 CHALLENGES |
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From 6 April 2021, when a busines engages with an individual through a PSC, the business as the client is now required to determine if the arrangement falls inside IR35 and therefore, whether the individual would be an employee for tax purposes if they had engaged directly with the business ─ so, the client must also issue a Status Determination Statement (SDS) to the PSC contractor and any other intermediary the client contracts with, confirming its determination and providing the reasons. If the client determines that a PSC contractor is inside IR35, income tax, employee and employer national insurance contributions and apprenticeship levy, where applicable, will be payable |
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HMRC developed the 'Check Employment Status for Tax (CEST)' online tool ─ useful but has been widely criticised for its inability to provide a response in certain circumstances so, be aware and use it with some degree of caution and, if it isn't clear, discuss with HMRC ─ some improvements have been introduced but CEST fails to provide an outcome in approx 15% of cases ... |
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Check Employment Status for Tax - use the CEST TOOL
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David F Jones FCIOB FASI MRICS MIConstM ─ Director of Education & Training
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The Institute of Construction Management Ltd
r/o 24 Landport Terrace, Portsmouth, Hampshire, PO1 2RG
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