Friday, 02 November 2018 12:31

Worker Status and IR35

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You've probably had enough analysis of this week’s budget so we’ll keep comments to just the one point; IR35.

As we predicted back in June 2017, the Government are tightening the screw on IR35 legislation. Apparently this is the single most lucrative change in the budget and is set to net the Treasury an estimated £1.6 Billion.

First introduced in 1999, the legislation is designed to close the tax-avoiding loophole of workers who set up limited companies to provide services on a business-to-business relationship basis, where in fact an employer-employee relationship is more appropriate. IR35 means PAYE and NIC deductions are made at source as though the contractor was in fact an employee.

When we discussed it last June, HMRC were only looking at those contractors who supplied goods and (predominantly) services to the public sector. Chancellor Philip Hammond announced in this week's budget that enforcement will now extend to contractors supplying larger businesses. It’s probably only a matter of time then before all businesses are affected.

The individuals who will be affected by the enforcement are arguably getting a raw deal as they will have to pay tax and NI as though they are employees but get none of the benefits such as sick pay and holiday pay. The move smacks of hypocrisy as a number of high profile court cases this year have determined that “self-employed” gig economy workers should enjoy employee status and its associated benefits.

As there are tax implications for businesses who get the IR35 legislation wrong, it is vital that businesses refer to workers correctly and use the appropriate status of worker for any particular job.

To help you establish the status of your workers’ we’ve compiled a brief definition of each type. If you are in any doubt about how a worker should be treated then you should contact us for further advice.

  • Full-Time Permanent Employee: An employed member of staff who works a full working week.
  • Part-Time Permanent Employee: The same as a full-time employee, including rights accrual, but will work for a reduced, set number of hours or days per week.
  • Temporary Employee: A member of staff employed for a set period usually of less than 6 months.
  • Temporary Employee – Agency Employed: For very short term appointments of just a few weeks or even days, temporary staff are often taken on via an agency.
  • Fixed Term Contract: Fixed term contracts are usually used to employ staff to manage or cover a specific project or period of maternity leave.
  • Casual Workers: Casual workers are likely to be employed on a zero-hours contract. They are only given work when there is work to be done and therefore only paid when they have carried out work.
  • Contractor: A contractor would be self-employed or employed through another company and provide services to you for a fee. This is the status that will be affected by the IR35 regulations.

In all cases you should at the very least check that your employee’s contracts describe what you believe their status to be. If there is a discrepancy, don’t act without seeking advice as you may unwittingly be in breach of contractual terms. You can contact us for further advice or assistance regarding employee statuses and relevant contracts by telephone on 01452 331331 or at This email address is being protected from spambots. You need JavaScript enabled to view it. 

 

Read 71 times Last modified on Friday, 02 November 2018 13:54

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