IR35 And Your Limited Company

IR35 April 2020

As you are no doubt aware, IR35 is coming in from April this year and in order to help everyone understand how this will impact them we have put together the following points for clarification.

Firstly, it is up to the client to decide whether you will be caught by the regulations meaning that PAYE and NI needs to be applied. This determination should be passed to you and your agency (if applicable) so that you can be paid appropriately. You are able to dispute this if you think this has been incorrectly determined.

The test you will need to carry out is called ‘CEST’, HMRC have completed an online tool which will help determine the outcome: https://www.gov.uk/guidance/check-employment-status-for-tax

Should your contract be caught by the regulations, PAYE and NI will need to be deducted from the monies you earn.

This can be done by either  

1 – The client or the Agency putting you directly on their payroll and you becoming a ‘normal’ employee with the usual holiday and sick pay rights

OR

2 – You continue to invoice the Agency/client through your limited company and they make deductions from this. Please note that it is possible for the Agency/client to deduct the Employers NI in addition to the usual PAYE and EE NI and you would receive even less this way than if you were on the payroll.  It is unlikely that it would be beneficial for you to continue to operate through your limited company in this way.

If your contract is caught by IR35 it is unlikely that you will be able to reclaim the majority of your expenses against your income as at present and this must be considered when you decide whether to accept the new terms or find other contracts outside IR35.

Please note that this is the current position, however we are aware that there is currently a consultation ongoing which closes on 19th February to confirm this treatment, and that things may also change in the budget which is expected on 11 March. Once announcements have been made in respect of these, we will update you further.

Just to let you know we do not complete any contract reviews and you will require a solicitor for this. If you would like us to introduce you to a solicitor, please contact us and we would be happy to make an introduction.

I hope this provides you with a clearer understanding on IR35 and please note the above may be subject to change once the budget is released (hopefully the 11 March).

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