Spec Finish

Finance Many construction businesses are about to be faced with new responsibilities and liabilities in a major change to the way they engage with individual subcontractors trading through their own limited company. Tax and insurance expert, Paul Mason , explains the new IR35 rules. IR35: TIME IS RUNNING OUT TO PREPARE FOR ONE OF THE BIGGEST TAX CHANGES IN A GENERATION From 6 April, relevant end client engagers (the company obtaining the services of the Personal Service Company (PSC) contractor), must decide whether the contractor is working inside or outside of IR35 10 www.thefis.org T HE new off payroll working rules – better known as IR35 – will require medium and large sized construction businesses to determine the IR35 status of each and every engagement and will take precedence over the Construction Industry Scheme requirements when engaging limited company subcontractors. What is off payroll working/IR35? The Intermediaries Legislation (IR35), was introduced in April 2000 to tackle ‘disguised employment’; contractors engaged through an ‘intermediary’, in the form of their own limited company (often referred to as a Personal Service Company or PSC) or through a partnership, but providing services indistinguishable from work undertaken by an employee. This was causing a loss of tax and National Insurance Contributions on engagements deemed equivalent to an employed relationship. IR35 requires you to disregard the intermediary and ask the question: “If we were engaging that person as an individual, would the relationship look like employment or self-employment?” • If employment , the relationship is ‘inside’ IR35 and from 6 April 2021 PAYE will need to be deducted at source by the ‘fee payer’. • If it is ‘outside’ and a self-employment relationship, the subcontractor’s company can be paid gross. Paul Mason