March 17, 2020 Update: Government have announced a delay in IR35 Off – Payroll reform to April 2021.
So far in this IR35 series of blogs, we have laid out the ways in which IR35 tax legislation is expected to change from 6 April 2020, and provided information on the ways in which you can begin to prepare in advance. The key information is, you’ll likely be affected if you:
- work with contactors who operate through a personal service company (PSC), and
- those contractors are on assignments for medium-large size clients during/and or after 6 April 2020.
Once you’ve sorted your clients and temporary workers into the ‘most likely to be affected’, and you’ve used the CEST tool or reviewed the criteria as outlined in our last blog to establish if the working relationship will be deemed as employment based, you’ll have a list of those contractors, and clients, who fall ‘within the scope’ of the new IR35 Off-Payroll regulations.
Calculate the costs
For these contractors, you, as the recruitment business, will hold the responsibility for unpaid tax and NICs on the contractor’s income, whereas currently this lies with the contractor’s PSC. Once the decision is made, from 6 April 2020, you will need to deduct and remit PAYE and NICs as necessary.
This is where our Margin Calculator comes in. This tool aims to help you understand the additional costs of employing your contractor, and the impact that IR35 may have on your profit margins. Within this simple Excel based Margin Calculator, you can enter the pay rate of the contractor, the margin you wish to maintain, and it will calculate the additional costs and what your charge rate should be.
Please watch my video below for more guidance on using the Margin Calculator.
We will continue to share more insights on how IR35 will affect your recruitment business. Next, we will look at the impact on contractors, before looking at frequently asked questions and how you can work with umbrella companies as an alternative. As always, if you have any queries please contact Marie Pegram on 01462 687333 or by email firstname.lastname@example.org.