The Most Asked Questions about IR35
Since the IR35 tax change was delayed due to the pandemic, Google Trends shows that the search interest around the subject has seen a 71% decrease. To help ensure contractors are well-prepared ahead of 6th April 2021, we’ve answered the most asked IR35 questions according to search engine data.
From ‘how to prepare’ to ‘how to avoid’, our very own IR35 expert – Paul Mason, Head of Tax Partnerships – addresses each one.
Other IR35 questions contractors are asking:
IR35 date
11% search interest
When does IR35 come into effect?
The new IR35 legislation comes into effect at the start of the 2021/22 tax year, on 6th April 2021.
Will IR35 be scrapped?
In July 2020, MPs voted against delaying IR35 until 2023/24 tax year, and there has been no suggestion from either the Government of HMRC that IR35 legislation will be delayed again.
IR35 liability
7% search interest
Who is affected?
The latest IR35 legislation is wide ranging and affects all parts of the supply chain, including contractors, fee payers (such as recruitment agencies) and end clients.
Who pays employers NI?
The fee payer is responsible for paying Employers' National Insurance Contributions, but the reality is that if the contractor's day rate is not increased, the contractor will be meeting the cost.
Who is the end client?
The end client is the entity that the contractor provides services to. The end client is responsible for making the IR35 decision.
Who is the fee payer?
The fee payer is the entity that pays the contractor's limited company, and is responsible for deducting the correct amount of tax based on the end client's IR35 status determination. This could be the end client if it engages contractors directly; but often it will be a recruitment agency that sits between the end client and the contractor.
IR35 when working abroad
If the contractor is a UK taxpayer, IR35 can still apply even if they are working abroad or being paid in a different currency. It will depend upon whether the end client has a UK presence; otherwise the contractor must determine their own IR35 status.
What is an intermediary?
An intermediary is usually the contractor's limited company (also known as a Personal Service Company) which provides the services to the end client.
Avoiding IR35
5% search interest
Can you avoid IR35?
You can't legally avoid IR35 if you are providing services through a limited company. Your end client will make the decision or, if you are engaged by a small company, it is your decision to make. That doesn't mean whether you want to apply IR35, but whether it should apply.
You can take steps to prove that you are a genuine contractor not working in disguised employment.
For even more guidance and information on the upcoming anti-avoidance tax change, head to our IR35 hub.
Sources:
- IR35 interest rate based on Google Trends data from date range 23rd Feb 2020 – 23rd Feb 2021
- Avoid IR35 query results based on Google Trends data logged 24th February 2021
- Most popular query results based on Google Trends data on 28th January 2021
- Most asked questions based on Answer the Public data logged 28th January 2021