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The Implications of IR35 on Contract Employers

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Are you Prepared for IR35?

As of 6 April 2021, the Off-Payroll Working Rules (IR35) will be introduced to the private sector in the UK. Whilst contractors can continue to work via their LTD company entities, the responsibility of employment status will move to the end engager in the contractual chain. Based on this determination, UK contractors will fall inside or outside of IR35. Where the contractor falls inside of IR35, the income should be treated as “deemed employment income” and will be subject to PAYE taxation and national insurance contributions. This can be handled either via their current LTD company entity or by moving to a PAYE model as an employee.

Note: This law will affect all global organizations with a UK-registered entity, branch, or subsidiary. If you engage UK nationals on a contract basis through their own self-employed, limited company, or corp to corp set ups, you may need to determine how tax should be paid on the contractor’s income before you issue payment.

IR35’s Impact

What does IR35 mean for you?

As the end engager, you will be responsible for completing an Employment Status Determination for every UK LTD Company that you engage. This determination must review the specific working practices for that assignment to confirm the employment status of that individual. If the contractor completes a similar role to that of one of your permanent employees, or could be deemed under your supervision, direction, or control, this could indicate an employed arrangement and subsequently place the contractor inside of IR35.

If you are then paying the contractor directly, you become the “Fee-Payer” and are responsible for deducting employee taxes and contributing the Employers National Insurance element to be paid to UK tax authorities. This legislation is compulsory for all clients with a UK presence so it is imperative that you plan for these changes now.

For more information, read our blog on How the New IR35 Law Effects You.

We can help

Planet Pharma has a dedicated UK team with extensive knowledge in IR35 regulations who can support you in these new legal obligations.

Once you have made your status determinations, Planet Pharma can enter the contractual chain as an intermediary and pass results back to LTD company contractors. We also will work directly with your contractors so they understand their new tax status post April 2021 and explain their options to ensure all parties in the chain remain compliant with UK law.

More importantly, once Planet Pharma is part of the contractual chain, the Fee-Payer liability will pass to us and we will become responsible for ensuring the correct taxation is applied and reported to UK tax authorities, before the contractor is paid. Planet Pharma can offer tailored guidance in this area to ensure the approach you take is best suited to the needs of your business while maintaining contractor satisfaction and engagement.

If this is something that you would like support with, please get in touch.

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