Step 1: Decide if you are classed as a ‘small company’. If you are then you are exempt from the off-payroll working rules for now and IR35 still applies as it did before i.e. if they have one, a worker’s personal services company (PSC) carries the risk.
A company will be classed as small if it has at least TWO of the following:
- Turnover of £10.2 million or less
- £5.1 million on its balance sheet
- 50 employees or less (measured by average no in a tax year)
Please note, if you are a UK subsidiary of a larger group with a foreign parent this could affect your small company classification.
Step 2: Identify which of your workers are currently providing services through intermediaries (direct or through an agency).
Step 3: Review the status of all existing contractors – you might want to consider using CEST – HMRC’s service to Check Employment Status for Tax (https://www.gov.uk/guidance/check-employment-status-for-tax) or engaging with professional advisers.
Step 4: Analyze the results:
- They are already PAYE – e.g. umbrella company worker – no action needed
- They are working through a PSC outside IR35 – no change is needed but keep under regular review
- Their status is grey or undetermined – can changes be made so they are outside scope?
- They are working through a PSC but inside IR35 – in which case:
- Assess if they are business critical
- You will need to change their pay structure
- NICs will need to be deducted at source so your costs will increase and/or the worker will receive less money
Step 5: Process and education:
- Provide training for internal staff involved in hiring
- Set up a process for status determination and challenges for existing workers and ensure existing contractors have been assessed pre April 2020
- For new hires ensure those with responsibility for hiring (both internal and external) have a process for determining status
- Consider how processes for new hires might need to change post April (for example core roles are assessed in advance)
- Make contractual changes
If you need help preparing for IR35 next April or have any questions please get in touch with us today.