If your contractors operate as an intermediary, for example a Personal Service Company (PSC), then they are responsible for ensuring they remain compliant with the Intermediaries legislation, known as IR35. They are therefore responsible for ensuring whether IR35 applies for each individual assignment.
IR35 is intended to catch those working as "disguised employees" so as to ensure the same deductions are made in line with an employee on PAYE. The current test looks at the underlying relationship between the worker and the client for each contract or engagement.
The Chancellor's said in his July 2015 Budget speech that, currently, IR35 was ineffective, with non-compliance expected to cost the Exchequer £430 million this year alone. The Chancellor asked HMRC to start a dialogue with business on ways to improve the IR35 Legislation; their objective being to find a solution that protects the exchequer and improves fairness in the system. The first discussion document was published on the 17th July 2015 and included proposals to change the "test" and to place a greater obligation on the end engager. It is widely believed throughout the industry that such a tangible financial benefit is unlikely to be realised and that the proposed changes substantially fail to consider the whole picture, are out of touch with the realities of the modern PSC and fail to address current issues of non-compliance. The discussion document could however herald a positive step to modernising IR35 for the better, providing that alternative suggestions and responses from industry and individuals are taken on board. PayStream has been actively involved in this discussion process recognising it as an opportunity for progress in this area.
Whilst this dialogue continues one constant remains and that is although the long term future of IR35 may be open to debate, the government has no immediate plans to scrap the legislation but changes to how it operates are on the horizon. The government has given no deadline for any potential modifications so watch this space! In the meantime the current rules remain and so it's business as usual. In the event of any changes PayStream remain proactive in ensuring we are up to speed and fully engaged with alternatives, being well placed to transfer our existing expertise and knowledge to any new guidelines or legislation that may impact your contractors.
As IR35 remains a watched area by HMRC it is more important than ever to ensure your contractors seek expert advice so that they remain compliant; the consequences of failing to consider if IR35 applies to each of their engagements could have serious implications for them. Here at PayStream we believe that compliance is key to running a successful and stress free business and our Compliance Team are on hand to help your contractors. Our IR35 review service is available to existing and new customers and offers jargon-free and easy to understand advice. For more information on how we can help your contractors, please feel free to email us at IR35@paystream.co.uk.