What is IR35 and what does it mean for me as an employer?

21/04/2023

If you pay workers to complete work for you off-payroll, you need to be aware of IR35.

What is IR35?

IR35 was designed to ensure that workers pay the correct amount of tax and National Insurance contributions (NICs).

The legislation applies to workers who provide their services to clients through an intermediary, such as a limited company, but who would be considered employees if they were working directly for the client.

What does IR35 mean for you?

If you’re an employer who engages with workers through an intermediary, you’ll need to determine whether the worker should be considered an employee for tax purposes.

As the client, you will typically be responsible for determining whether the worker is employed by you. This can be done via the Government’s check employment status for tax (CEST) tool.

If they are classified as an employee, you’ll be responsible for deducting Income Tax and NICs from their pay and paying employer NICs.

You will need to consider factors such as their level of control over their work, whether they are required to work exclusively for you, and whether they are integrated into your business.

You must also produce a status determination statement (SDS) which outlines the reasons for how the worker is treated for tax purposes.

How can you ensure compliance?

The best way to ensure compliance with IR35 is to carry out a thorough review of your engagements with workers who provide services through an intermediary.

This will involve identifying any workers who may fall under the scope of IR35 and assessing their employment status.

You may also want to consider reviewing your contracts with workers to ensure they’re consistent with the employment status you have assigned them.

Make sure you communicate with your workers about any changes to their employment status and how it may impact their pay and benefits. This will help to ensure a smooth transition and prevent any misunderstandings or disputes.

IR35 is a complex tax legislation that can have significant implications for employers who engage with workers through an intermediary.

It’s important to ensure compliance with the legislation to avoid penalties and fines, but it can be a challenging process.

At WMT, we can support you to ensure that you are making the right decisions and taking the necessary steps to comply with IR35.

Need support fulfilling your IR35 obligations? Get in touch.