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EQ IR35 FAQ

IR35 Understanding

As a contractor, IR35 will have a significant impact on how you secure work and how you are paid for your services. Please visit the HMRC website more detail about this change in legislation.

At Equiniti Hazell Carr we are committed to providing the highest standards of candidate care. As part of our service we want to make sure our contractors are well informed about legislation that may affect them.

We are also talking to our clients to understand their preferences when engaging with contractors.  We will support our contractors through this journey to help them ensure they remain fully compliant with IR35 regulations.

Umbrella Companies

To achieve the above, we will work with a small number of preferred umbrella companies. The details of these umbrella companies will be communicated to all of our contractors in the coming weeks.

If you currently work through an umbrella company you do not need to make any changes. If you currently work through a limited company, and you are considering moving to an umbrella company, we suggest that you wait until our panel of umbrella companies has been announced.

Introduction to Frequently Asked Questions (FAQs)

We are committed to answering your questions and providing information that is relevant. We will continue to make sure that any changes that affect how we work together are promptly communicated and we will send regular communications prior to the change in legislation.

The FAQs are intended for:

  • Contractors who operate as personal service companies (PSC)/limited companies.
  • Contractors who currently use the services of an umbrella company.

Please see below for answers to some of the questions that we have been asked. We will continue to add further answers over the coming weeks, so please regularly visit this page for updates.

Q1. What is IR35?

A1. IR35’s official name is “The Intermediate Legislation” and became law in the Finance Act 2000. Until April 2020 it primarily affects contractors working in the public sector. However, from 6th April 2020 the legislation will also affect the private sector.

One of the main principles of this legislation is to ensure that all workers are correctly paying tax and national insurance contributions. In simple terms, from 6th April 2020 the IR35 tax status of an individual working through a limited company will be determined by the end client receiving that individual’s services.

Q2. When is this due to take effect?

A2. The new rules will come into effect on 6th April 2020, and will apply to any payments made to a contractor working through a limited company on or after that date.

Q3. Who will be affected by IR35?

A3. If you currently work through a PSC/limited company, then from April 2020, the responsibility for assessing your employment status for IR35 tax purposes becomes the responsibility of the end client. This anticipated change has resulted in companies reviewing how they engage the services of contractors. 

If you work through an umbrella company the IR35 legislation won’t affect you directly, however, you should be aware that we are currently reviewing which umbrella companies we will work with in the future.

Q4. What is an umbrella company?

A4. An umbrella company employs individuals (contractors) who work on temporary and fixed term assignments. This typically means:

  • The contractor is an employee of the umbrella company, which ensures the correct Income Tax and National Insurance deductions are made at source.
  • The contractor completes a timesheet that is submitted to the umbrella company who then invoices us for payment.
  • Using an umbrella company is the main alternative to setting up your own limited company.

Q5. Will I be able to work with you (Equiniti Hazell Carr) via any umbrella company?

A5. We will only work with reputable umbrella companies that are financially sound and have appropriate systems and controls in place governing their activities. We also only work with organisations that are accredited by the Freelancer and Contractor Services Association (FCSA) and meet the end client’s standards.

A panel of umbrella companies will be published in the coming weeks.

Q6. Will I need to change companies if I currently work through an umbrella company that is not included in your panel?

A6. Yes. We will help you with any required changes when we publish our panel of preferred umbrella companies.

Q7. When will I be expected to change from a PSC/limited company to an umbrella company?

A7. We will continue to work closely with contractors and communicate any required changes and deadlines.

Q8. Does this mean that PAYE and umbrella companies will be the only options once IR35 comes into force?

A8. We anticipate that these two payment models will become the most common in the market.

Q9. Will more contractors be offered permanent positions?

A9. This is a possibility, but it is dependent on the end client. We will work closely with our clients to understand their business requirements. 

As with any change in your contract, if you are offered a permanent role, please inform us at the earliest opportunity.

Q10. Will umbrella companies pay sick pay, holiday pay and pension contribution from April 2020 onwards?

A10. If you use an umbrella company, we would expect them to offer these employee benefits.

Q11. Will the rule changes be applied retrospectively?

A11. HMRC have confirmed they will not make retrospective claims against Limited Companies if they change their status from outside to inside IR35. 

Q12. How will it work for futures roles?

A12. We will work with our end clients to ensure they establish the IR35 status of all roles and we will include this status in all roles that we advertise. Contractors will then be informed of the IR35 status of a role from the start of the resourcing process.

Q13. Is there a chance that the 6th April 2020 implementation will be delayed?

A13. We have not received any indication that it will be delayed.

Q14. How will IR35 affect contracts that are already underway when the legislation comes into force?

A14. If the role is determine to be inside IR35 then we expect that contracts will be terminated and the payment model of either PAYE or umbrella company will be made available.

Q15. Are short-term contracts, i.e. a one or two month contract, liable to IR35?

A15. Yes. Each contract will be evaluated by HMRC.

Q16. How does it work if I subcontract for two different companies?

A16. Each role will need to be assessed on its own merit.

Q17. My limited company has multiple work streams, does this automatically take it out of IR35?

A17. No, each work stream would be assessed on its own merit; you could potentially be inside IR35 on one and outside on another.

Q18. Will I be able to continue my current role as a self-employed individual rather than a limited company?

A18. No, self-employment is also governed by IR35.

Q19. My company is based outside the UK, and my contract is with a UK based company, but all work I'm providing in support of the contract is not based in the UK. How will IR35 affect me?

A19. We suggest that you seek specialist advice from your accountant and/or professional advisor, as they will be able to better advise you on the potential financial consequences.

Q20. Why has the IR35 reform been introduced?

A20. The Government assessment was that small limited companies were being used to disguise employment and, and as a result, less Income and National Insurance tax was being paid. The Chancellor described the IR35 reforms as a means of tackling perceived high levels of non-compliance with IR35 among the self-employed within the private sector. HMRC estimate the cost of non-compliance at £1.2 billion per annum by 2023.

Q21. Is this new Legislation?

A21. No it’s not new. The intermediaries legislation, commonly known as 'IR35', was introduced with effect from 6 April 2000. The IR35 rules were subsequently introduced into the Public Sector on 6th April 2017 and will be introduced into the Private Sector from 6th April 2020.

Q22. How does IR35 impact the Private Sector and contractors who work through a Limited Company?

A22. Currently it's up to the directors of the Limited Company to perform the IR35 assessment and decide if the role is an independent role or more like employment. From 6th April 2020 - the end Client will be responsible for determining the IR35 status of the role and, if assessed as "inside IR35" – income tax and National Insurance will have to be deducted before making payment to the contractor's Limited Company.

Q23. What’s a “blanket decision?”

A23. When IR35 was introduced into the Public sector in 2017, many Public Sector bodies automatically assigned the same IR35 status to all roles without completing the individual assessments as required by the legislation. The term "blanket " decision refers to this approach.  

Q24. Will IR35 apply to all contractors who work through a Limited Company?

A24. From 6th April 2020 - yes - IR35 impacts all contractors who worked through a Limited Company and also the Private Sector organisations who will be responsible for deciding the IR35 status of a role/assignment.  

Q25. Can I avoid IR35?

A25. If you work through a Limited Company - IR35 can not be avoided.
But please note
- if you are currently working through an Umbrella Company or intend to do so before 6th April 2020 - IR35 does not apply.

Q26. How is IR35 determined?

A26. To help organisations within the Public Sector - an assessment tool was developed. The following links provide further information about the current assessment process to check employment status and the impact of the 6th April 2020 changes.
https://www.gov.uk/guidance/check-employment-status-for-tax

https://www.gov.uk/guidance/understanding-off-payroll-working-ir35

Q27. Who will assess my IR35 status ahead of 6th April 2020?

A27. Ahead of the 6th April 2020 deadline - Equiniti will continue to work closely with Clients to understand how they are planning for IR35 and what, if, any changes will take place. Once we have clarity from our Clients - we will share with you their decisions and explain the impact of these decisions and any changes that maybe required.  

Q28. If I am working for multiple clients, does it automatically mean I am working outside IR35?

A28. No that is not the case. After 6th April 2020 each of the end Clients are responsible for determining the IR35 status of the role/assignment and communicating their decision. Therefore, each assignment should be assessed and could result in different IR35 outcomes.  

Q29. Is there any useful reading on this subject?

A29. For further information on the current legislation please go to the HMRC website.

Q30. How will I know if I am inside or outside of IR35 for my current assignment?

A30. Equiniti Hazell Carr will contact you to let you know about any changes that you may need to make. We are currently consulting with all our end Clients to confirm their approach to IR35. Once the Client has confirmed their approach to IR35 we will share this information with you along with the impact (if any) of their decision on the role. Our hope is that we have responses from Clients by end of November 2019.

Q31. What are the potential impacts for contractors if the Clients decide that they do not want to engage with PSCs/Limited Companies?

A31. If this is our Client's approach it will mean that a contractor who is currently working via a Limited Company will need to switch to an Umbrella Company to continue with an existing and any new assignments with Equiniti Hazell Carr. Equiniti Hazell Carr are expecting to confirm on, or shortly after, 18th November 2019 their panel of Umbrella companies.

Q32. What are the potential impacts for contractors if Clients carry out IR35 assessment and deem the role to be outside IR35?

A32. After the Client has carried out an IR35 assessment of the role - the Client will inform Equiniti Hazell Carr and the contractor by issuing a Status Determination Statement (SDS). If Equiniti Hazell Carr receive a SDS from a Client we will contact the impacted contractor/s to discuss next steps.

Q33. What are the potential impacts for contractors if Clients carry out IR35 assessment and deem the role to be inside IR35?

A33. Once Equiniti Hazell Carr receive the Status Determination Statement (SDS) from the end Client and the SDS confirms the role to be inside IR35, the contractor will need to work through an Umbrella Company. Equiniti Hazell Carr are expecting to confirm on, or shortly after, 18th November 2019 their panel of Umbrella companies.

Q34. If I switch to an Umbrella Company, does that make me an employee?

A34. Yes - you will be treated as an employee by the Umbrella Company. Equiniti Hazell Carr are expecting to confirm on, or shortly after, 18th November 2019 their panel of Umbrella companies.

Q35. What happens if I disagree with Client's the IR35 outcome?

A35. If a contractor disagrees with the IR35 outcome, the Status Determination Statement (SDS) will also include details of the appeals process for the contractor to follow.

Q 36.  Following the HMRC Announcement on 7th February 2020 confirming that contractors can still be paid via their Limited Company until 5th April 2020.  Please can I delay switching to an umbrella company until 1st April 2020?

A36a.  Lloyds Banking Group (including MBNA) and HSBC (including John Lewis and Marks and Spencer) and Barclays

The above Clients confirmed previously that they would not work with Limited Companies after 1st March 2020.  Therefore, if you are currently working on an assignment for one of these clients – the switch to one of the Equiniti Hazell Carr panel of umbrella company requirements and timelines remain unchanged.

Please note - the switch to an Umbrella Company should have already been completed with a start date for that contract of 1st March 2020Please do not delay completing the switch to your chosen umbrella company.

 A36b Equiniti Hazell Carr

Equiniti Hazell Carr also confirmed that as a consequence of the IR35 legislation and following extensive consultations with internal stakeholders, external advisors and Clients, that from 29th February 2020 Equiniti Hazell Carr will primarily engage with independent contractors via a panel of umbrella companies. Therefore, the switch to one of the umbrella companies on the Equiniti Hazell Carr panel of umbrella companies’ requirements and timelines remain unchanged.

Q 37. I have been told that some Agencies are advising we should delay signing up with an Umbrella Company because we can continue to work through a Limited Company until 5th April 2020.

A37. Firstly, please do not delay completing the switch to your chosen umbrella company (from the Equiniti Hazell Carr panel of umbrella companies)

 To confirm, the recent HMRC announcement makes no difference to the requirement to switch to one of the Equiniti Hazell Carr panel of umbrella companies because:

  • Lloyds Banking Group (including MBNA) or HSBC (including John Lewis and Marks and Spencer) and Barclays confirmed that they will not work with Limited Companies after 1st March 2020.  The recent HMRC announcement makes no difference to these Clients’ decision. 
  • Equiniti Hazell Carr also confirmed as from 1st March 2020 – for majority of contractors working on existing or future assignments, contractors will be required to work via one of the Equiniti Hazell Carr panel of Umbrella Companies. 

Please note - the switch to an Umbrella Company should have already been completed with a start date for that contract of 1st March 2020.  Please do not delay completing the switch to your chosen umbrella company

Q38. Because my “Limited Company” contract was signed prior to 5th April 2020, I’ve been informed that I can continue to work via my Limited Company until the end of the contract.

 A38. No that isn’t correct.  HMRC confirmed that the IR35 regulations will apply to services provided via a PSC (Limited Company) from 6th April 2020.  Therefore, if you are currently working on an existing assignment via a Limited Company – after 6th April 2020 IR35 regulations will apply.

To confirm the recent HMRC announcement makes no difference to the requirement to switch to one of the Equiniti Hazell Carr panel of umbrella companies because:

  • Lloyds Banking Group (including MBNA) or HSBC (including John Lewis and Marks and Spencer) and Barclays confirmed that they will not work with Limited Companies after 1st March 2020.  The recent HMRC announcement makes no difference to these Clients’ decisions. 
  • Equiniti Hazell Carr also confirmed as from 1st March 2020 – for majority of contractors working on existing or future assignments, contractors will be required to work via one of the Equiniti Hazell Carr panel of Umbrella Companies. 

Please note - the switch to Umbrella Company should have already be completed with a start date for that contract of 1st March 2020.  Please do not delay completing the switch to your chosen umbrella company.

Q39. There are a number of expenses that I currently incur and will continue to incur even after I switch to an Umbrella Company.  After I switch to the Umbrella Company, can you explain what expenses I can continue to charge to my Limited Company, what expenses are covered by Equiniti Hazell Carr and what expenses are covered by the Umbrella Company.

The following information is intended as general guidance only.  As everyone’s circumstances are different, we strongly advise that you speak to your Umbrella Company about their expense policy and also seek professional advice about the type of expenses that can be claimed.

 A39. If you operate via a Limited Company, expenses you currently claim and how you claim these expenses does not change until the date that your Umbrella Company contract becomes effective. 

If you are working via an Umbrella Company and you are eligible to claim expenses, your contract will include details of the expenses that you are able to claim and the expense policy or policies that need to be adhered to i.e.

Before submitting any expense claim to Equiniti Hazell Carr you should check with your Manager that the expenses that maybe incurred can be charged to the end Client or to Equiniti Hazell Carr.

Once your expenses have been authorised, they are paid to the Umbrella Company gross (i.e. without Income Tax or NI deductions). 

Please speak to your Umbrella Company about their expense policy and payment of expenses that have been reimbursed by Equiniti Hazell Carr. HMRC also provide guidance about expenses that can be claimed via HMRC Self-Assessment.  https://www.gov.uk/self-assessment-tax-returns

Q40. If I am switching to an umbrella company before the end of the tax year, do I need to wait until end of tax year to claim expenses?

A40:

  • If you are claiming expenses via HMRC Self-Assessment – the HMRC website advises that the Self-Assessment form is filled in after the end of the tax year (5th April).
  • If you are claiming expenses via a Limited Company, you can continue to do so for expenses incurred up until your contract with Umbrella Company becomes effective
  • We’d also recommend that you speak to your accountant and/or HMRC to ensure you get the right professional guidance and advice.

Q41. What expenses will I be able to claim as an umbrella contractor from Equiniti Hazell Carr and how is this different to what I was able to claim as a PSC contractor?

A41. If, due to the nature of your role and with prior approval of your Manager, you are able to claim expenses, please refer to the information contained in the Equiniti Hazell Carr Standard Expense Policy.

For any additional expenses that you currently claim that are not covered by Equiniti Hazell Carr, please speak to your accountant and your Umbrella Company to seek further advice and guidance.

Q42. Do I need to obtain approval for expenses from Equiniti Hazell Carr or from my umbrella company?

A42. If you are claiming expenses from Equiniti Hazell Carr, you need approval from your EQ Line Manager. 

Remember:

  • Check your contract to make sure you can claim expenses
  • Adhere to the relevant expense policy (Client and/or Equiniti Hazell Carr Expense Policy)
  • That expenses reimbursed by Equiniti Hazell Carr will be paid gross to the Umbrella Company
  • Speak to your Umbrella Company to find out how they process and pay expenses that have been reimbursed by Equiniti Hazell Carr.

If the expense is not included in your contract or covered by Equiniti Hazell Carr, please speak to your Umbrella Company about their expense policy and/or your accountant to get professional advice.

Q43 – Are all expenses tax free?

A43. Expenses that are reimbursed by the end Client or Equiniti Hazell Carr are paid to the Umbrella Company gross (i.e. without Income Tax or NI deductions). 

Please speak to your accountant and/or your Umbrella Company to find out more about any other expenses you can claim, how to claim and the tax treatment of those expenses.

HMRC also provide guidance about expenses that can be claimed via HMRC Self-Assessment.  https://www.gov.uk/self-assessment-tax-returns

Version 1.4. Updated 9th March 2020. 

If you have any further questions about IR35, please contact us on 01903 852 531 or email us at contact@hazellcarr.com.