Most of those working within the recruitment industry, their contractors and public sector bodies will most likely be aware of the changes in IR35 that are upon us in April. For those unfamiliar, HMRC is pushing the responsibility of assessing the work practices of a limited company onto the public sector body in order to decide whether IR35 applies. The agency should be informed and if the limited company is deemed inside IR35, the agency should apply appropriate PAYE.
We're seeing a lot of people on LinkedIn claiming 'if you're affected by IR35, we have a model to ensure your limited companies can still be paid and we'll sort out all the reporting'.
Don't be fooled! These intermediaries are merely offering to apply PAYE to the limited company caught by IR35, pay it over and submit the relevant RTI report. All for a small margin. In the majority of cases, an agency will be able to carry this out themselves. There is no magic bullet.
In the months to come and beyond, there will be limited companies that are genuinely found outside of IR35 by the public sector body engaging them. There are some good, reputable companies that can help carry out IR35 assessments and have years of experience doing so. Some even offer associated indemnity insurance so stick to a company who specialise in this area. As an agency though, just be careful who is offering this sort of insurance. Beware of intermediaries trying to make a quick buck by offering to enter into the contractual chain; if they have payroll/accountancy interests, you may find yourself falling foul of MSC legislation. It is also rumoured HMRC are likely to add debt transfer into the legislation, so if that intermediary folds, you'll end up footing the bill anyway.
For those contractors found inside of IR35, consider making your limited company dormant in the short term and engaging with an Umbrella company or going traditional PAYE directly with the agency. The PAYE deduction will be the same as that placed on a limited company but you can do away with accountancy fees. In certain circumstances, you may be able to submit business-allowable expenses as an employee of the Umbrella company and retain continuous employment on various assignments. It may also be that genuinely self-employed contractors enter the public sector to take their place.
If you'd like to discuss any of this further, feel free to call our office on 01305 233170 and talk to one of our team.