Off-Payroll Working (IR35) Rules
The rules for off-payroll working (often called ‘IR35’) were reformed in 2017, following a series of disputes over whether workers were really self-employed or were taking advantage of a tax benefit. Initially rolled out in the public sector, the reforms are to be extended to the private sector. Originally planned to be effective from 6th April 2020, the Government announced a pause to changes – during the Coronavirus pandemic – to 2021.
This change may have significant implications both for workers (if they have previously operated as a Limited Company – or ‘PSC’) and for transport operators. As with all matters of legislation, Driver Hire takes a responsible and fully compliant approach to the changes.
We hope the following information for both companies and for workers will be helpful to you.
What is changing?
Historically, the PSC (i.e. the worker) has been responsible for determining if IR35 applies to the work being undertaken, and they have also been responsible for making the relevant deductions.
The hiring company (or “End User“) is responsible for determining the employment status of anyone working in their organisation. The End User must pass their determination on to all organisations in the supply chain, including the PSC.
Responsibility for making the required PAYE and National Insurance deductions will usually sit with the organisation making the payment to the PSC (known as the “Fee Payer“).
‘Inside’ or ‘Outside’ IR35?
The most important point is to understand whether a particular assignment falls ‘inside’ IR35 (the worker is effectively an employee) or ‘outside’ (they are operating as a genuine contractor).
A number of simple tests will help in making this determination. For example, could an alternative worker be provided, is the worker under the ‘Supervision, Direction and Control’ of the End User, and what level of financial risk does the worker face?
The Government’s ‘CEST‘ tool should be used to make an accurate determination for each assignment.
Guidance for companies and workers
For more information on these tests, how the IR35 changes affect you, please download your free guide below.