what you need to know and do about
IR35

WHAT IS IR35?

IR35 is legislation introduced by HMRC to reduce the perceived problem of non-payment of tax by subcontractors. It is designed to assess whether someone is a genuine contractor or a ‘disguised’ employee. 

 

WHAT IS A DISGUISED EMPLOYEE AND WHEN DOES IR35 APPLY?

 

HMRC proposes that all CIS registered contractors or contractors working through a Limited Company or Personal Service Company (PSC) will be counted as ‘employees’ under PAYE rules unless they comply with these conditions:

  • Control: There must be absolutely no (or minimal) control over the worker and they must provide all the necessary plant and equipment to complete the work.

  • Mutuality of Obligations: Workers must show that they can turn work down and that they are not obliged to take on the work from the company.

  • Substitute: The contractor should be able to provide other personnel of the same skill level to complete the work and the substitute should be engaged and paid during the same year.

  • Insurance: The worker must have paid public liability insurance or other relevant business insurances.

 

DOES IT AFFECT MY BUSINESS?

 

If you are a medium or large business – those that meet at least two of the following conditions you will need to conform with the IR35 legislation:

  1. annual turnover more than £10.2m

  2. balance sheet total more than £5.1m

  3. more than 50 employees

 

WHEN IS IR35 BEING INTRODUCED?

It is being introduced and will be applicable from April 2021 so companies should be prepared in good time ahead of this to ensure you are compliant.

 

WHAT IDO I NEED TO DO? 

 

If you are using The Square, we will take care of and comply with all IR35 legislation for all CIS or Limited Company subcontractors and will help you remain compliant for those workers that fall within IR35.

 

If you not using The Square and are a medium or large business that uses subcontractors that are CIS self employed or employed through a PSC (a Limited Company) then you will need to carry out an employment status assessment for your contractors. You will then have to deduct and process all payroll tax and NIC from the gross payments due to each contractor as you do with all PAYE employees. The IR35 rules take precedence over CIS.

For help to get your business IR35 ready and compliant, get in touch with one of the team - call us on 0203 868 6303 or email us and we'll get back to you ASAP.

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