Current government legislation on whether personal service companies applies to IR35 have always been in the hands of the intermediary. The current rules leave the decision of whether the government scheme applies solely down to the company itself, leaving them to make sure that they are compliant and ensuring that:

 

  • Calculations of employment payments and paying any tax and national insurance contributions that is due by the end of the tax year
  • Correctly accounting for these payments
  • If the contract changes, the IR35 is reassessed accordingly
  • If paying corporation tax, distributions or operating the CIS regime, deemed employment payment is taken into account.

 

Also, any information relating to IR35 must be reported on any self assessments submitted and a payroll must be running for any salary or wages the company pays during the tax year.

 

However as of 6th April 2017, the rules are changing and the responsibility for deciding whether the IR35 applies is shifting from the service company itself to the person that they are working for, if they are a government body. These will include a wide range of organisations such as state schools, local authorities, NHS establishments and other publicly owned bodies.

 

Even though these new rules won’t be implemented until after April 2017, they will need to be taken into consideration before then, especially when starting new work with these government bodies. Asking if they intend to operate the IR35 rules will enable the service company to factor in the extra price when you invoice for your work.

 

These new rules will initially only apply to work done for government bodies but if it proves to be successful, it will more than likely be rolled out for all contracts.

 

For more information on the IR35 rules, just give us a call and we will be happy to help!

 

Information taken from ‘Tips & Advice Tax’ – 16th Year, Issue 13