The decision on IR35 status when you are trading through your own limited company has, until recently, always fallen on you – the contractor. However, due to perceived non-compliance, HMRC implemented reforms in the public sector in April 2017 which put the decision and risk in the hands of the end hirer and fee payer (the party that pays the PSC).
From April 2021, these reforms are being implemented in the private sector and the end hirer ad the fee payer will be responsible for making the IR35 status decision and not you. The hirer and will be liable for making the wrong decision.
public sector experience
In April 2017 this legislation was brought into the public sector. It transpired that generally hirers were risk averse and deemed most assignments to be caught by IR35.
This had a significant impact on contractors net income and how they were engaged.
how do you prepare?
Having a detailed IR35 review of your contract and working practices for any assignments that go beyond April 2021 will allow you to understand your strengths and weaknesses and put you in a good position to discuss them at an early stage with your hirer.
Using the government’s independent Check Employment Status Tool (CEST) would be a good starting point.
IR35 decisions what are your options?
- become a temporary employee of the hirer, if this is offered
- be engaged by your agency under PAYE, if this is offered
- be employed and paid by an umbrella company
- be employed and paid by a PEO company
- keep your limited company and be paid by a fee payer
IR35 fee payer
|suitable for all?||only those on umbrella rates >£11/hour||yes*||only those with a limited company*|
|payrates quoted||limited company rates||actual gross pay rate||limited company rates|
|deductions from quoted pay rate||
|entitled to holiday pay?||
|pension auto enrolment||
|private pension scheme available||
|typical pay frequency||weekly/monthly||weekly/monthly||weekly/monthly|
|pay breakdown||invoice reconciliation & payslip||simple payslip||remittance|
|onboarding checks required||right to work & identity||right to work & identity||ltd company check & identity|
|can simultaneously process assignments through more than one agency?||
*option only available if model pre-agreed with your agency/client.
After April 2021 your hirer may insist that you are engaged under a PAYE solution.
Our award-winning giant umbrella is simple to use, compliant, paperless, mobile friendly and easy to join online. It also provides giant advantage our employee benefit scheme which can save you £000's each year.
As an alternative to an umbrella solution we have giant PEO. Offering the same benefits as giant umbrella but more straightforward because you are quoted your actual pay rate.