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Off-Payroll (IR35) reforms

Following the introduction of IR35 reforms into the public sector in 2017, it's been confirmed that the new off-payroll legislation will also be extended into the private sector from April 2020. Rullion is here to help you understand the changes and guide you through the process when the legislation comes into effect.

IR35 centres on the following points:

Control

Control

How much can the client control how, what, where, and when the worker carries out the work?

Substitution

Substitution

Can the worker send a substitute to carry out the work on their behalf, or is it the personal service of the worker that is required?

Mutuality of Obligation

Mutuality of Obligation

Is the worker obliged to accept additional work offered and is the client obliged to offer this work?

From April 2020, the end client ("the hirer") will be responsible for carrying out an assessment to determine the IR35 status of limited company workers. If they are found to be inside IR35, they will be subject to PAYE and NICs deductions. The client will then have an obligation to share the IR35 status with the off-payroll worker and other entities involved in the supply chain. The client must then demonstrate they've taken reasonable care in carrying out the IR35 assessment and have created a robust process that caters for any subsequent worker challenges. 

If a worker is deemed outside IR35 and the decision is later proven to be incorrect, liability for PAYE and NICs deductions will fall on the organisation that's failed to fulfil their legal obligation. Assuming you've taken reasonable care, liability will fall to the "fee payer" - the recruitment company paying the IR35 worker.

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Implications for workers

  • Workers inside IR35 will be required to change engagement to PAYE or Umbrella status.
  • In some circumstances, the worker may decide to continue with their Limited Company, however they must agree to PAYE and NICs deductions.
  • In any event, the take-home pay of the worker will be significantly reduced if the contractor is deemed to be inside IR35.