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It does indicate huge changes to employment tax regulations – and let’s not under-estimate the large financial penalties for noncompliance.  Notwithstanding the continued navigation through the pandemic and still assessing the impact of Brexit, another huge change faces businesses – and therefore efforts need to be placed on preparing and ensuring compliance for the roll out of the regulation changes.

What does the government define as the IR35 off-payroll working rules?

These can apply if a worker (sometimes known as a contractor) provides their services through their own limited company or another type of intermediary to the client.

An intermediary will usually be the worker’s own personal service company, but could also be any of the following:

• a partnership
• a personal service company
• an individual

The rules make sure that workers, who would have been an employee if they were providing their services directly to the client, pay more or less the same tax and National Insurance contributions as employees. These rules are often known as ‘IR35’.

The client is the organisation who is or will be receiving the services of a contractor. They may also be known as the engager, hirer or end client. The client will be responsible for determining if the off-payroll working rules apply.

A sole trader is not affected by IR35 as the legislation only applies to incorporated companies. 

How do I know if my company is eligible?

From 6 April 2021 the proposed changes will require all public sector authorities and medium and large-sized private sector clients to be responsible for deciding if the rules apply.

If a worker provides services to a small client in the private sector, the worker’s intermediary will remain responsible for deciding the worker’s employment status and if the rules apply.

What is the Understanding of a small client mean in terms of IR35?

A business will always be small for its first financial year and will continue to be treated as small until it fails to meet the requirements to remain small.

The definition of what is a ‘small business’ is taken from the Companies Act 2006 and will apply to limited companies, LLPs, unregistered companies and overseas companies.

A business will be small if it satisfies two or more of the following requirements:

• It has an annual turnover not exceeding £10.2m
• It has a balance sheet total not more than £5.1m
• It had an average of no more than 50 employees for the company’s financial year.

So, what do I do if my business is eligible for IR35

Undertake a Review

Firstly, undertake a review of your existing contractor and permanent staff.  Where you are unsure of workers status, take steps to clarify whether they fall within or out with IR35 rules.

Equally if you are reliant on recruitment companies and agencies, ensure that you have their reassurance and proof of their compliance with the new IR35 rules.  Check how contractors are hired within the company and that this can be tracked back.

Assess the Cost Implication

Next would to be establish whether the continued use of such an arrangement of a contractor which falls in the IR35 category the affordability.  Look at alternative options such as replacing with permanent, fixed term recruitment.

Communicate outcome of Review and Decisions Taken

Following the review and assessment, a company should communicate clearly to the contractors how they wish to move forward and their future within the company – ensuring that key dependency and critical contractors are registered on risk registers for ongoing monitoring and action.

Plan Future Resource Demand

Look at future resource needs, assess how you will resource the need, and if a contractor is the most suitable and best option, that they are introduced carefully, and that full assessment is taken on their classification.

Most worrying of all…

According to the proposed laws which will come into force, HMRC will be able to examine contract agreements up to 6 years to check if the legislation applies – so be prepared and ensure that you have placed financial provision if you think your company is eligible for IR35.

Do get in touch with Bower HR to assist in assessing your IR35 eligibility.

Serena Bower (MCIPD)

Bower HR Consultancy

January 2021

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In the middle of a health pandemic, the clock still ticks towards the end of the year on the actual Brexit withdrawal deal. Here at Bower HR we continue to closely monitor developments.

Trade talks are ongoing, with them temporarily suspended yesterday due to a COVID-19 case in the negotiation team.  Negotiations are up to the wire with matters un-resolved – particularly around fisheries – although it is reported both sides are softening on their positions.

For people matters, there is a critical focus for three areas:

• Existing Staff
• Future staff to fulfil vacancies
• Employers responsibilities

For Existing Employees

Brexit means that those who are from the EU, must seek settlement status or pre-settled status to continue to live and work here in the UK beyond 30 June 2021. Employers should and can support those staff who need to apply.

The scheme is free to apply, however approvals have slowed during the pandemic, so it is vital those employees take action now and not leave it too late.

Future Staff to fulfil vacancies

It is important that companies understand and are clear that where reliance has been on EU and non-EU citizens to fulfil vacancies – from 1st January 2021 anyone coming to the UK to work, excluding Irish citizens, will need to apply for permission in advance.

A points system will apply for those wishing to secure a visa and enter the UK to work from 1 January 2021.

A total of 70 points is needed to be able to apply to work in the UK. Further information on the allocation of points can be found on the Government website
http://ow.ly/yUl750Bmnrt

The new skilled worker system, specifies that anyone coming to the UK to work will need to demonstrate that:

• they have a job offer from a Home Office licensed sponsor
• the job offer is at the required skill level – RQF 3 or above (A Level and equivalent)
• they speak English to the required standard

In addition to this, the job offer must meet the applicable minimum salary threshold. This is the higher of either:

• the general salary threshold set by Her Majesty’s Government on advice of the independent Migration Advisory Committee at £25,600, or
• the specific salary requirement for their occupation, known as the “going rate”

Employers Responsibilities

You will need to become a recognised licenced Home Office Sponsor.

The licence you need depends on whether the workers you want to fill your jobs are:

• Tier 2 – skilled workers with long-term job offers
• Tier 5 – skilled temporary workers

You can apply for a licence covering either tier or both.

Click here to find out more https://www.gov.uk/uk-visa-sponsorship-employers Jobs will have a Standard Occupational Classification (SOC) code which determines whether it can proceed through the skilled worker route.

The Immigration Skills Charge is a fee paid by a UK employer for each skilled migrant worker they employ through the Skilled Worker route to the ISC. Employers must pay £1,000 per skilled worker for the first 12 months, with an additional £500 charge for each subsequent six-month period. Discounted rates will apply as they do now to charities and small business.

If you need clarification or support in the coming period around the Brexit impact – do get in touch with us here at Bower HR Consultancy

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