Helping clients and our consultants to navigate the IR35 changes

From 6 April 2021, the off-payroll tax rules (IR35) are going to be extended across the private sector bringing large and medium-sized companies under the regulatory framework that is currently in place in the public sector.

We want to make dealing with these changes as straightforward as possible for our consultants and our clients.

Our engagement solutions

Vario have a range of engagement solutions to help and support our clients and consultants, whatever the IR35 position. We are committed to ensuring our clients continue to get the flexible freelance resource they need through the Vario model.  For our consultants, we recognise the importance of ensuring we have a range of different engagement options, enabling them to retain flexibility and control over their freelance careers.

Update: IR35 Delayed

On 17 March, the UK Government announced that the changes to the off-payroll working rules (known as IR35) will be delayed for one year from 6th April 2020 until 6 April 2021.

This is part of the additional support measures for businesses and individuals to deal with the economic impacts of Covid-19.

The Government have made it clear this is a deferral, not a cancellation, and they remain committed to introducing this policy to ensure that people working like employees through a limited company (typically a personal services company (PSC)), pay broadly the same tax as individuals who are employed directly.

What's changing with IR35?

IR35 is anti-avoidance tax legislation which sets the rules to make sure contractors working through an intermediary (usually a limited company or PSC) pay the correct tax. The rules are in place to address what HMRC describe as “deemed employment”, where individuals operating through PSCs work like employees and they should pay broadly the same income tax and NICs regardless of the structure they work through.

Under current rules, it is the responsibility of the individual worker to ensure they are complying with the IR35 rules, and properly accounting for tax through their PSC.

From 6 April 2021, responsibility for determining the employment status for tax purposes of off-payroll workers will (where services are being provided to non-SME end clients) shift from the individual contractor to the end client business or organisation. The changes also impose payroll obligations on the business that is paying the worker’s PSC or other intermediary.

What does this mean for me?

A deferral of the changes is undoubtedly welcome as businesses get ready to weather the storm ahead, and the economic downturn.

Until 6 April 2021, the current off-payroll working rules will remain in force. This means that for our consultants operating through a PSC in the private sector, it will remain your responsibility to assess your IR35 position, and properly account for tax through your PSC.

For consultants re-engaged through a PAYE route, it is possible that client organisations will wish to maintain those arrangements, whether for convenience, to avoid unpicking previously communicated policy decisions, or duplicating efforts in the run up to April 2021.

If day rates have been re-negotiated on a PAYE basis, where applicable reverting back to a PSC engagement will involve a reinstatement of original day rates.

The Vario team are on hand to answer any individual queries you may have– please do contact our dedicated IR35 project team [email protected], or speak to your usual Vario team contact. We are here to help!

Update: IR35 Delayed

After 6 April 2021: It will no longer be the responsibility of a consultant’s PSC to determine how an assignment should be taxed. The responsibility will move to the end client (which might be either Pinsent Masons or an external Pinsent Masons client).

How the market is responding

Many end client users are actively engaged in preparations for the IR35 changes. Some have responded to the upcoming changes by adopting a policy which means they will no longer engage contractors through PSCs, but only on a PAYE basis. Others are taking a different approach, setting up systems and processes to enable them to continue to compliantly engage contractors through PSCs beyond April 2021.

Ensuring continuity of support

As a law firm offering, we take compliance very seriously and are well placed to help our clients and consultants navigate the upcoming changes.

We’ve partnered with specialist IR35 advisors to help us develop our approach towards all things IR35. A dedicated IR35 project team has been established, and we’re working closely with a number of our clients to help inform their thinking, as well as ensuring continuity of service.

Vario have a comprehensive range of PSC and PAYE engagement solutions to help and support our clients and consultants, whatever the IR35 position.

Vario PSC solutions

When the rules come into force, Vario will continue to support freelancers engaging through PSCs, whether individual engagements fall inside or outside of IR35.

Vario PSC solutions include payroll support to PSC contractors undertaking public sector assignments and from 6 April 2021, private sector assignments which are caught by the IR35 rules.

Vario PAYE solutions

Vario has a range of engagement options (including PAYE Umbrella) to ensure our consultants have maximum choice and flexibility.

Next steps

Reaching out

The Vario team have been reaching out to all contractors currently on assignment on an individual basis to discuss next steps and to work through the consequences of the upcoming IR35 tax changes for those assignments extending beyond 6 April. This dialogue and discussion will continue in the forthcoming weeks.

Liaising

We are also liaising closely with all contractors considering new assignment opportunities and working through the IR35 implications with end client users, to ensure new assignments straddling the introduction of the new rules can proceed in the most efficient and seamless way possible.

IR35 Mailbox

Alongside your usual Vario team contact, our dedicated IR35 team are on hand to provide you with any help and support you may need, or to answer any individual queries. Please do not hesitate to contact them via our IR35 mailbox.