Your Contractor IR35 Questions Answered
As the IR35 deadline is fast approaching, at Source we're working hard to ensure our clients and contractors are prepared for the challenges ahead. From hosting webinars, parterning with IR35 experts, and creating lots of marketing collateral, we are here to make sure IR35 causes as little disruption as possible.
We recently hosted an IR35 webinar with our pannel of experts. Ryan Dawson who is on a mission to protect everyone from IR35, and our umbrella partners, Tim Hunt from Crest Plus, and Leigh Stuntman from Orange Genie.
We had over 400 contractor's sign up to our webinar, and over 100 questions asked throughout! With help from Kingsbridge, Crest Plus & Orange Genie, we've put together the answered to some of the most relevants from our webinar to share with all our contractors.
We have created a hub for our contractors, where you can find further information about IR35 and what the changes mean to you. Click here to go to our hub.
Q: Does IR35 still apply if you are self-employed and not registered as a limited company?
A: No, IR35 rules only apply to contractors who are operating via a limited company or a partnership.
Q: What is the definition of a small company? What happens if they are part of a larger group? Do HMRC consider the turnover of the Group or just that one company you are directly involved with?
A: A group’s size is determined by the size of its parent company. In order to identify the size of a parent company, you should aggregate the figures from all members together. Therefore, to determine the size of a company within a group, you add together all figures of the members within the group and the outcome will apply to all members.
HMRC is using the definition found within the Companies Act 2006. Qualifying criteria for the Small Companies Regime can be found from section 382 Companies Act 2006 onwards. A corporate entity will be medium or large-sized if it meets at least two of the following criteria for two consecutive financial years:
Turnover of more than £10.2million
A balance sheet total (assets) of more than £5.1 million
An average of more than 50 employees
Q: I’ve asked my accountant about IR35 (I have a Ltd company) and he said as long as you work for multiple clients and are working for them across various projects you won’t fall foul of IR35. How much truth is there in this?
A: Having multiple clients is a positive indicator in respect of IR35 but it won’t on its own put you outside IR35. IR35 needs to be determined based upon a wide range of employment status principles including control, personal service, and mutuality of obligation amongst other things.
Q: Given the reasons for postponing the implementation of IR35 last year (COVID19), is there any talk of further postponement given the economy hasn’t recovered and there is still high levels of unemployment?
A: Unfortunately, none whatsoever at this stage. HMRC are still producing new guidance in respect of helping the supply chain prepare for April 2021 so businesses should now continue their final preparations ready for the new rules to be implemented.
Q: When a current contract spans the IR35 deadline and is currently outside IR35, does the Status Determination immediately transfer to the end client?
A: Yes, as of April 6th as per the new rules, the end-user client will be responsible for status and they may or may not have a difference of opinion on status.
Q: If you are found to be within IR35 does your contract then automatically cover additional benefits such as holiday pay, sick pay, and other 'employee' benefits?
A: If contracting inside IR35, you will need to consider your engagement options and partnering with either one of Source’s two approved umbrella suppliers, Crest Plus or Orange Genie, then you will benefit from additional benefits such as, contract of employment with full employment rights, standard statutory rights relating to sick pay, maternity pay, paternity pay etc, holiday pay, and depending on which umbrella company you partner with they will offer many more additional benefits.
Q: Will Source only offer compliant contracts to contractors?
A: We have had our contracts updated and reviewed by APSCO and our business insurance with Hiscox as well as the legal team at Kingsbridge and they have all been approved.
Q: We have seen some clients taking a 'blanket ban' approach to determining IR35 status for their freelance population. How do you recommend approaching companies who appear to be blanket applying inside/outside to a role?
A: In most instances, we believe that a blanket ‘inside IR35” approach isn’t the most appropriate approach and there are various tools and products available – such as ours – to help companies comply and navigate the legislation and manage their risk. And that is certainly what we are seeing in the market, where outside of a few high profile cases the vast majority of businesses are looking to continue employing contractors on a compliant basis.
It depends on your relationship with the client and your power of influence. Education is key and it is possible to still benefit from a flexible workforce compliantly. In the public sector, blanket bans that were made were certainly lifted after a short period once people felt more comfortable with the legislation and their ability to reach the compliant standards needed to mitigate risk. So, either educate if you have access to the right ears or target working for clients who do not take this approach and then wait a while until the dust settles…
ir35@wearesource.co.uk .
We have created a hub for our contractors, where you can find further information about IR35 and what the changes mean to you. Click here to go to our hub.