What is IR35

What is IR35?
The Intermediaries Legislation (IR35) is in place to ensure that individuals working through an intermediary pay the correct income tax and national insurance. The HMRC defines an intermediary as usually being the worker’s own personal service company (PSC) or a partnership, a managed service company, or an individual.

IR35 is designed to make sure that workers, who would have been an employee if they were providing their services directly to the client, pay broadly the same tax and National Insurance contributions as employees. 

What is changing?
The changes were rolled out to the Public Sector in 2017, but until now in the Private Sector the PSC has been responsible for deciding if the relevant rules apply i.e. if the assignment is inside or outside IR35.

The proposals are that from 6th April 2020, the end client will be responsible for deciding if off-payroll working rules apply. 

The Private Sector changes will apply to medium and large sized businesses (as defined by the Companies Act 2006).

In cases where the assignment is inside IR35 the ‘fee payer’ - the organisation closest to the PSC and making the payment to the PSC - has to pay the PAYE tax and National insurance contributions to the HMRC before paying the PSC the net payment.