IR35
IR35 – It’s a complicated area
Following the changes to the IR35 Off-Payroll regulations in April 2021 it’s critically important that all parties in the contingent supply chain understand the implications and their exposure to risk.
Subject to any relevant exemptions, the responsibility for determining whether a contractor’s assignment is “Inside” or “Outside” IR35 passed from the contractor to the end-client who receives the contractor’s services. Likewise, the responsibility for deducting and paying tax moved to the “Fee-payer”, usually the party closest in the chain to the contractor’s Personal Service Company (“PSC”), typically an agency or umbrella company.
As a result, all parties now need to be open and transparent in order to ensure compliance with tax and legal regulations.
What are the legal obligations of IR35?
What are the legal obligations of IR35?
There are a number of obligations on the end client from the IR35 off payroll reforms, including providing a Status Determination Statement (SDS) prior to the first payment. This should state clearly if the contract is deemed to be Inside or Outside IR35. They are also required to provide a formal process for contractors to challenge the SDS.
This is the client-led disagreement process, whereby representations are made to the end-client, by the contractor, about why they believe the determination is incorrect. The end-client has 45 days to consider these and either change the SDS or give its reasons for deciding that the original SDS was correct.
But what is the process for challenging a status determination statement? We have put together a handy guide with tips on how to approach your dispute and the process that should be followed.
Download our guide here >> Contractor disputes: Challenging an IR35 status determination statement
How can WTT help?
How can WTT help?
WTT Legal can assist end clients, agencies and contractors with their new obligations under the IR35 Off-Payroll regulations. Our assessment tool uses 95 questions to build a comprehensive understanding of the contractor and client relationship. Through review and discussion, we can give you an opinion on whether we believe the engagement to be Inside or Outside IR35, together with a report on the contractual clauses that pose an Inside IR35 risk.
Where our opinion is contrary to that of the end client, we can open discussions with them to understand their concerns and either give the reassurance through our vast experience or discuss changes to the contract that are agreeable to both parties which would remove the risk. That contract would then be monitored on an ongoing basis for full compliance ensuring that all parties do not unnecessarily expose themselves to unwanted tax liabilities.
Statement of Work
If some of your assignments are project-based and can easily be structured as a deliverable, outcome-based piece of work, why not manage them under a Statement of Work (SOW)? These are particularly appropriate for certain types of projects, commonly found in the IT or tech sector.
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Client-size test
There are 3 key criteria to assess if you qualify as a small business, defined in the Companies Act 2006, and in simple terms the business must meet two or more of the requirements over two consecutive financial years.
Do you meet these requirements? Take the test and find out here.
Take the test here
In addition to advising on SOW and IR35, the solicitors at WTT Legal have extensive experience within the staffing industry with specific expertise in restrictive covenants, the Agency Workers Regulations, the Employment Agencies Act, the Construction Industry Scheme (“CIS”) and the Equality Act. We can also assist with any recruitment-related dispute including:
- Debt recovery (letters of claim, small claims etc.)
- Fee disputes (enforcement of restrictive covenants, transfer fees, failure to sign timesheets etc.)
- Contractor disputes (i.e. restrictive covenants, AWR, termination issues, payment issues etc)
- Employment disputes (discrimination, termination, holiday pay etc.)
- Supplier disputes (umbrella companies etc.)
Finally, we can assist with the drafting of employment contracts, staff handbooks, disciplinary and grievance procedures, and issues relating to TUPE or redundancies.
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