What are implications to a Ltd Company Contractor of being in or outside IR35?

Up until 2017 in the public sector and April 2021 in the private sector the responsibility for determining the IR35 status and any tax liability lied with the PSC (contractor). From April 2021, in the private sector, Status Determination will be the responsibility of the End Hirer and tax responsibility will be with the Fee Payer.

Whilst you should continue to follow the rules and act compliantly, it is important you understand the effect these changes might have on your current and future contractor workers.

What does it mean if a contractor is found outside IR35?

A Ltd Company Contractor who is found inside IR35 will receive different tax treatment to a Ltd Company Contractor who is outside. An outside assignment means that the contractor is operating as a genuine business and is therefore able to pay themselves in a more tax efficient way.

What does it mean if a contractor is found inside IR35?

If the assignment is inside IR35, the contractor will be treated similarly to an employee of that business and therefore subject to the same PAYE and National Insurance contributions, which will be taxed at source.

What are the options if a contractor is found inside IR35?

If found inside IR35, a contractor may choose that working through an Umbrella rather than their Ltd Company is more tax efficient; this can often pose administrative and finance issues for contractors’ Ltd Companies, whilst some contractors feel accepting an inside IR35 assignment may pose a risk to the legitimacy of future outside IR35 assignments.

How do I know that an IR35 status is set correctly?

To ensure that an IR35 status is set correctly, you should appoint an expert to assist you. As well as offering contract and permanent recruitment services, Corecom Consulting offers a fully insured compliance product, its services and education, paid for by Corecom for its contract customers. We’re passionate about hiring the best IT talent but also making sure we, our clients and our contractors are ahead of the curve in legislative compliance.

Corecom IR35 Connect is our comprehensive compliance solution for contractor hiring businesses. It consists of three key, connected services that insures your business against any potential tax liability, reduces contractor management and administration and limits the strain of contractor cash flow:

IR35 Protect

A fully insured, client facing, online platform for Status Determinations protecting all parties in the supply chain.

Corecom Projects

A project/product solution, based on deliverables and milestones, wrapped up in a single Statement of Work managed by a Technical Engagement Manager for your contractor recruitment

Corecom Payroll Outsourcing

The option to outsource the payroll of your direct contractors, removing your “Fee-payer” tax liability and improving your business’ cash flow.

Book your demo

Don’t just take our word for it – book a demo today to discuss your specific requirements. We’ll show you how easy it is to use our online platform for your Status Determination Statements.