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New IR35 Rules from 6 April 2021

March 2021

The February 2021 Newsletter confirmed that the Government’s proposals to introduce amendments to the IR35 rules would be going ahead with effect from 6 April 2021 and summarised the effect of those amendments.

These amendments are indeed going ahead on that date without any change, despite the unpopularity of the changes amongst those who will be affected by them.

Any individual (“a worker”) who provides their services through a personal service company or other intermediary company (a “company”), and any business or other organisation (“a client”) that engages a worker through a company to provide services to the client, needs to be aware of these changes to the IR35 rules.

The Guidance Note on Employment, Self-Employment, and IR35 explains the existing IR35 rules and the April 2021 changes to the IR35 rules and it is recommend that you read it if you are, or might be, impacted by IR35.

Status Determination Statement

The changes to the rules require the client to identify whether there would be “disguised employment” and then to complete and issue to the worker and the company a “status determination statement” form setting out the client’s determination as to whether there is “disguised employment”. Please see below as to how to prepare such a form.

If the client determines that there is “disguised employment”, it will have to operate PAYE, and it must pay the remuneration to the company net of tax and NI. If the client determines however that it is genuine self-employment, the client will be able to pay the company gross remuneration.

The purpose of the requirement to issue a “status determination statement” is to promote transparency throughout the supply chain and ultimately ensure that accurate IR35 worker status assessments are made by businesses.

New Simply-Docs Status Determination Statement template

Whilst the new IR35 rules require the client to issue a status determination statement, the rules do not prescribe or recommend any form.

The rules do however require the statement to comply with certain requirements, as follows:

· the statement must give the client’s conclusion (i.e. whether it believes that the engagement of the worker falls inside or outside the scope of IR35) and its reasons for coming to that conclusion;

· the client must take reasonable care when making the determination, as to which see the Government’s guidance about “reasonable care” in this context. “Reasonable care” will entail following that guidance, seeking the advice of a qualified professional adviser, reassessing the engagement if there are changes to a worker’s contract or working practices and accurately completing HMRC’s CEST tool; and

· the client must give the statement to the worker and the company.

The template Status Determination Statement can assist you in preparing your statement. You can use it as a checklist or starting point when putting together your own statement to be issued when engaging a worker on a particular assignment. The new template includes some illustrative reasons; these serve to demonstrate factors that you might need to cover and the type of statements that you might make in relation to those factors.

Use of this new template can save you time, but you will need to alter, delete and add to the text in the template in each case in order to ensure that your statement fits the particular circumstances of that case.

The contents of this Newsletter are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.

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