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Up and down the country, medium and large businesses are scratching their heads and wondering what to do about IR35, otherwise known as the off-payroll working rules.
Unless there is a change of heart from the government – not implausible now that Boris Johnson and Sajid Javid are prime minister and chancellor of the exchequer respectively – hiring organisations in the private sector will for the first time have to wrestle with this complex legislation and make difficult status determinations that could dramatically affect their businesses.
The rules, which come into effect from April 2020, require hiring organisations and end clients to decide whether IR35 should apply to each of their engagements with self-employed contractors. If they decide the engagement within IR35, PAYE tax and National Insurance will have to be deducted at source from payments made to the contractor.
The responsibility for deducting these sums will fall to the fee payer, which might be the client or it might be an agency in the supply chain. However, if the client is a small business (two of: less than £10.2m turnover; £5.1m balance sheet or 50 employees), they are not affected and the contractor remains liable for all IR35 compliance.
So far, so complicated. But that is just the beginning of the complexity. The real difficulty lies in working out whether IR35 should apply.
This will require you to consider murky aspects of case law such as ‘mutuality of obligation’ and ‘personal service’. You will also have to understand whether the contractor is ‘in business on their own account’. For that, you will need to know about the contractor’s other engagements: information the contractor may not want to share.
Faced with such technical and convoluted requirements, companies might be tempted simply to say that IR35 applies to all engagements, regardless of the working practices. The legislation forbids it, but no one expects HMRC to be anything other than entirely content with
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Amy leads the thought leadership and content strategy for LexisNexis UK. Her work appears in marketing campaigns, in industry press and in legal trade magazines. She is an established creative writer and researcher, with her articles appearing in national publications, such as City A.M. and Financial IT. She is also one of the writers and digital editors of LexisNexis' insights blogs including the Future of Law, and the In-house blog.
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