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Employment Status/IR35 issues

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HMRC have announced that the that the IR35 changes introduced into the Public Sector in 2017 will be extended into the private sector, (with an exclusion for small businesses), with effect from 6th April 2020.

This is major change in the status quo where previously the existing IR35 regulations only applied to the Personal Service Company (PSC) and not to the end engager. Now it is the hirer who must go through all of the employment status tests to arrive at a defensible position whether or not the PSC is caught by the new IR35 rules.

If the contract is deemed to be within IR35 then the hirer is obliged to subject presented invoices from the PSC to PAYE and NIC deductions (after VAT has been accounted for) with only the net amount remaining payable to the PSC.

HMRC are directing employers to their discredited Check of Employment Status Tool (CEST) which invariably classifies workers as employees. If this status is left unchallenged, companies will face a 13.8% rise in their employer’s NIC costs.

Fortunately, to aid the private sector, emTax consultants have access to an enterprise level IR35 online testing solution that considers all of the relevant employment status tax cases and delivers a reliable Artificial Intelligence based assessment of the true nature of the engagement with the worker. As employment status is not always a black or white issue there are a number of borderline cases that often arise. In these instances we can offer definitive advice on how to change working practices and contracts to tip the scales in favour of self-employment.

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