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IR35: verify


What is IR35?

In the UK, a great number of organisations engage self-employed contractors to complete work on their behalf. This gives more freedom to both parties and, typically, lower taxes. IR35 is shorthand for the situation where there is an “intermediary”, often a limited service company, involved in a relationship between a self-employed contractor and an end user or client (“IR35 Contractors”).

A: End User or Client

contracts with

B: Limited Company

contracts with

C: Individual who works with B

IR35 exists to try and prevent a situation whereby IR35 Contractors are actually employees but are using this structure to pay less tax. In essence, C works for A like an employee, but gets paid via B to pay less tax.

Why is this an issue?

At present, within the private sector, most, if not all, of the risk attached with the IR35 model sits with B, the Limited Company, as set out above. They are responsible for determining their own employment status. This requires considering the contractual documentation and the “day to day reality” of the relationship between the parties. Crucially, are liable for the tax if they get it wrong.

However, from April 2021 and beyond, this focus shifts, often to the End User or Client. As a result, if your company engages IR35 Contractors you may be responsible for: -

  • Determining whether or not that independent contractor is genuinely self-employed;
  • Liability for any unpaid taxes in the event that HMRC deem that your IR35 Contractor is in fact a disguised employee;
  • If they are not genuinely self-employed, bringing that IR35 Contractor onto your payroll.

As a result, it is imperative that all organisations who interact with IR35 Contractors are equipped to deal with these changes moving forward.

What is IR35 Verify and how can it help?

IR35: Verify is a suite of services designed to assist you in complying with your legal requirements in respect of IR35. IR35: Verify works by conducting a thorough review of your existing arrangements to identify areas of concern where there may be a risk an IR35 Contractor is a disguised employee.

In particular IR35: Verify can help by:-

  • Delivering training to key stakeholders in your business regarding IR35 and the changes that are coming;
  • Reviewing the day to day reality of the arrangements in determine whether the IR35 Contractor is behaving like an employee;
  • Providing a suite of new contractual documentation for you to use as you wish;
  • Preparation of a detailed, yet simple report which:-
    • Categorises IR35 Contractors based on risk;
    • Suggests revisions to contractual documentation;
    • Recommends alterations in your relationships with IR35 Contractors; and
    • Suggest revisions in the interaction between your business and IR35 Contractors to strengthen your arguments that no employment relationship exists.

To learn more about IR35: Verify, including pricing information, please contact; Ian Deakin and James Tait.