You Are Now Responsible for IR35 | Software Advisory Service

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IR35: You Are Now Responsible

The law is changing. Tax will now be your responsibility – not the contractor’s. Do you know the parameters? Do you know who is inside, or outside, IR35? If you answered no - this may prove costly. You could be heavily fined, or you could make a wrong call and discourage potential contract workers. For some businesses, who rely on such talent pools, this could be catastrophic.

But what is IR35?


From the Budget Document:

3.7 Off-payroll working in the private sector – The government reformed the off-payroll working rules (known as IR35) for engagements in the public sector in April 2017 and are now looking to extend the reforms to the private sector. This is in an attempt to ensure individuals who effectively work as employees are taxed as employees even if they choose to structure their work through a company.

What does this actually mean?

If a contractor is supplied via an agency, the agency is responsible for deducting tax via Pay As You Earn (PAYE) if the contractor is caught by IR35. If the business engages the contractor directly, the client is required to make the tax deductions.

Originally rolled out in the Public Sector, the time between announcing the requirements of IR35 and the deadline for being compliant was approximately 3 weeks. Such a tight turnaround proved challenging for many organisations, who found a high initial cost was involved in changing their business model to ensure compliance. The costs did, however, extend beyond financial means. It was not just about providing a salary calculator - a lot of time was spent trying to explain to contractors why exactly their take-home pay would be lower.

Can your business afford to spare these resources?

Many firms are choosing to be proactive and get ahead of the change in legislation, seeing an opportunity to re-evaluate the management of their workforce.

Admit it: your old-fashioned spreadsheets are time-consuming and incredibly inefficient. According to Forbes, a staggering 80% also contain errors. Can you state, with full confidence, that your personnel data is completely up-to-date and error-free? Did you hesitate?

Make the change in legislation the door to more efficient and streamlined HR processes. Get in touch with SAS today to compare HR solutions. We assess your business requirements and research the current marketplace to provide you with a bespoke shortlist of partners – for free.

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