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The new IR35 rules for private companies came into play on April 6 amid much criticism and speculation that it would make contractors an unattractive prospect for potential clients who would now face the responsibility of determining employment status and taking on additional responsibilities.
However, specialist contractor accountants, SJD Accountancy, has cautioned that the underlying factors which determine emplyment status have not changed, and clients should be prepared to access contractors' status fairly, so everyone can continue working together with confidence.
Joanne Harris, from SJD Accountancy said: “Following a deferral in 2020, the much-anticipated IR35 reforms come in to play today (April 6) which mean that it becomes the responsibility of medium and large sized businesses to determine the employment status of contractors or freelancers they work with.
“There has been a lot of talk and speculation about what the reforms will mean for the UK’s flexible workers, but the key message is that the underlying factors that determine employment status are not changing. If an assignment has been fairly assessed as outside IR35 prior to April 6 2021, the assignment should remain outside IR35 post the reforms.
“The biggest change for medium-large businesses is that the responsibility for determining the IR35 status of any contractor working for the company now sits with them. They will also need to issue what’s known as a Status Determination Statement to show this, until they do, they remain liable for any unpaid tax and national insurance.
“Businesses must work compliantly with the IR35 changes or else could face the prospect of paying back taxes and facing penalties, although HMRC have confirmed that clients will not have to pay penalties for inaccuracies in the first 12 months relating to the off-payroll working rules, unless there’s evidence of deliberate non-compliance.
“The new rules do not apply to small businesses, which HMRC defines in the case of IR35 as those that meet two of the following criteria - turnover of no more than £10.2 million; a balance sheet total of no more than £5.1 million, or no more than 50 employees. For engagements with small companies the responsibility for assessing the IR35 status of an assignment will remain with the contractor.
“There are some companies that have already announced blanket bans on working with contractors or freelancers providing their services through their own limited company.
"This is completely unnecessary and these businesses risk losing valuable contingent workers. The best approach is for all businesses to make sure they are prepared and are able to assess the IR35 status of assignments fairly, which will mean they can continue to engage with skilled contractors and freelancers. We would urge any companies considering a blanket ban to seriously think again.”
Further IR35 information
For more information about all aspects of IR35, including the controversial IR35 reforms see Shout99's News on IR35 section.
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Susie Hughes © Shout99 2021
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