One of the few pieces of good news for businesses at the start of the coronavirus pandemic was that the changes to IR35 (originally due to come into force in April 2020) were postponed by a year. The changes (which make end-users responsible for assessing employment status and paying tax and NI contributions for some self-employed consultants engaged via intermediaries) were almost universally unpopular with end-users and consultants. But the delay was only ever a temporary reprieve. However slowly time might seem to go by in lockdown, April 2021 is now not far away and businesses which engage self-employed consultants need to ensure that they are prepared.
The steps to get ready remain essentially the same as this time last year (see our previous guide here) with one important difference. The legislation now has a different definition of the types of intermediary (the company through which the consultant supplies services) which are covered. Previously the changes only covered companies in which the consultant (alone or with associates such as family members) held a 5% share. Now it also covers any company from which the consultant receives a payment which can reasonably be seen as payment for the consultancy services provided to the end-user. This does not, however, include agency workers whose agency pays tax and NI contributions through the PAYE system.
Businesses which engage consultants through any sort of intermediary should now be assessing whether the new IR35 rules will apply to their contractor base and ensuring that they are in a position to comply with their obligations under these rules. These obligations include providing a written assessment of employment status (a "status determination statement") and setting up a dispute resolution mechanism, so require some planning and thought. The penalties for failing to comply are significant, so businesses need to invest time in getting compliant systems set up.
Our IR35 hub has practical tips and guidance for businesses preparing for these changes.