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The New IR35 Rules

3rd March 2021

What is IR35?

IR35, or the off-payroll working, are the rules that apply if a worker or contractor provides their services through their own Limited Company or the worker’s own Personal Service Company (PSC). Keep reading to learn more about the new IR35 rules.

The new rules, which will be coming in to play in April 2021, 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.

Under the new IR35 rules, each contract where someone is working via a PSC should be assessed to decide if IR35 applies. If IR35 does apply, income received from that contract should be treated as employment income and should be subject to tax deductions and national insurance contributions.

From April 2021 this responsibility for operating the off-payroll working rules will move from individual contractors to the end-client organisation, recruitment business or other third party engaging the contractor – referred to as the “fee-payer” in the legislation.

You can read the guidance in full here – https://www.gov.uk/guidance/understanding-off-payroll-working-ir35

Small Company Exemption

This change will only affect medium and large private sector organisations with a UK connection as there is a “small company” exemption.

Under section 382 of Companies Act 2006, a company qualifies as “small” if two of the following conditions apply:

  1. Annual turnover not more than £10.2 million
  2. Balance sheet total not more than £5.1 million
  3. Number of employees not more than 50 employees

What does this mean for Bromak’s clients?

Our clients will need to identify who in their organisation is responsible and trained to complete an IR35 ‘Status Determination’. This will need to be completed for each assignment where the candidate indicates that they would want to work through their Ltd Company to determine if the role will fall inside or outside IR35.

Before a Ltd Company candidate is placed, we will seek to obtain the IR35 Status Determination from you and will be able to clearly outline to candidates what their payroll options are in line with current legislation.

When engaging with and placing candidates in future, we will continue to source the best and most suitable candidate for your vacancy.

What does this mean for Bromak’s candidates?

Candidates will be affected by the changes to the off-payroll working rules (IR35) if they are a contractor who works through an intermediary, e.g. their own limited company, often known as a personal service company (PSC).

The IR35 changes may affect how they pay the tax and National Insurance contributions that are due.

If, following a Status Determination completed by the End Hirer to determine whether they fall inside or outside of IR35, they fall inside of IR35, they will be given notice on their current contract and offered an alternative payroll model.

What next?

We suggest that candidates please speak with their accountant if they are currently working through their own Ltd Company.

If candidates or clients would like to speak to a Director about the IR35 changes and how they will be affected, please call Cameron or Chelsey on 01204 554884.

 

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