At the present time, IR35 in the private sector is due to change 6th April 2020. The changes will mean that the engager will be making the decision as to whether the Personal Service Company (PSC) is in fact a disguised employee, and therefore caught under the IR35 Legislation, or not. Under these circumstances, the entity in the chain making the payments to the PSC will have to deduct PAYE and National Insurance from all payments made.
The stages in the process will be:
- The engager will issue a Status Determination Statement (SDS) to the PSC stating the decision and the reasons for it.
- If the SDS states the PSC is outside IR35 then all is well and things will go on as they always have.
- If the SDS states the PSC is inside IR35, the reasons for the decision should be stated. One would expect the SDS to cover Personal Service, Control and Mutuality of Obligation. The PSC can either accept this decision or reply with questions and put forward an argument as to why they consider the decision to be wrong. The engager will then have 45 days to reply to the questions and either change their SDS opinion or stand by it.
There is an awful lot at stake here, it is expected the income of PSC’s will reduce by as much as 25% under these rules.
What can Lambert Chapman LLP do to help?
If you receive an SDS stating you are caught by IR35, please contact me and supply the following:
- A copy of the SDS
- A copy of your current contract with the engager. It might state all the right things but needs to be married up with the actual on the ground working situation
- Details of any substitutes that you might have sent in your place on the current contract
- A history of your contract dates with this engager
- A brief written overview of your actual working arrangements covering:
- are you controlled or do you have complete autonomy as to how you carry out your work
- would a substitute actually be accepted if you were to send one
- would you have to accept further work if offered
- have you turned down work in the past with this engager
We can then provide you with a detailed letter in reply to the SDS or contact the engager directly to discuss their decision.
Government review into the IR35 changes
Sajid Javid, as part of an election promise, has launched a review into the IR35 changes due to be introduced. It is not expected that this will change anything and I would expect things to go ahead as planned. Indeed, I have heard from a number of contractors who have been told they must go down the Umbrella Company route if they want to carry on with their contract, others that have been employed and others who have received an SDS stating they are caught.
Many large companies are just pulling the plug on using contractors all together and one can see why this would be when faced with an avalanche of questions and letters asking to clarify their original SDS decisions.
In my opinion, this will be the end for the vast majority of contractors who choose to work through a PSC which will be a big change of lifestyle. I hope I’m wrong!
If you have any queries about this article or your current position as a Contractor – please get in touch.
Posted by Duncan Forsyth
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.