Kae Travis

IR35 and Off-payroll Working

IR35 is a set of tax laws in the UK designed to combat tax avoidance by hiring companies and the workers that they hire. Here we explain how Alkane Solutions can assist hiring companies with compliance issues related to IR35 and off-payroll working.

Why does IR35 Exist?

By hiring workers through an intermediary (such as a limited company), hiring companies reduce their tax liability by paying less National Insurance contributions (NICs) and don’t have to offer any employment rights or benefits to the worker.

Combined with this, workers that operate through a limited company also pay less tax by paying themselves a low salary and taking the rest as dividends, therefore reducing their NIC and income tax liabilities.

Her Majesty’s Revenue and Customs (HMRC) believe that a large proportion of these workers are ‘disguised employees’ and therefore any income should be subject to the same levels of taxation as a ‘typical’ employee.

What is a Disguised Employee?

A ‘disguised’ employee is a term used to describe a worker who operates through an intermediary, yet shares the same working practises as a typical employee. Examples being (but not limited to):

    • working on the same site, with the same client, Monday to Friday, 9am until 5pm.
    • reporting to a line manager with a lack of autonomy and decision making.
    • using the client’s equipment.
    • claiming for overtime.
    • no ability to send a replacement to continue their work in the event of an absence.
    • not taking any financial risk if a work item takes longer to complete than anticipated.

For this type or worker, HMRC refers to the intermediary as a ‘Personal Service Company’ (PSC).

Why is IR35 Contentious?

IR35 is contentious for a variety of reasons. Workers generally think that even if some of their working practises conform to that of a typical employee, in contrast to an employee they have the disadvantages of:

  • No sick pay
  • No training costs
  • No holiday pay
  • No company schemes
  • No private healthcare
  • No maternity/paternity paid leave
  • No redundancy pay
  • Risk of no work between contracts
  • Payment issues

IR35 Reforms

From April 2021 for private sector organisations (IR35 tax laws have already applied to the public sector since 2017), responsibility for assessing whether IR35 applies to a worker will move from the worker/PSC to the client.

Understandably, most clients don’t want the financial risk of incorrectly deeming a worker outside IR35 (if ultimately they are caught inside IR35) and also don’t have the resources or internal knowledge to review every worker’s status.

How Can We Help?

Alkane Solutions provide an end-user computing (EUC) managed service to our clients. This service includes (but is not limited to) security (monthly patching and feature updates), desktop support, application packaging, hardware integrations, group policy management, virtual desktop infrastructure (VDI) support and much more.

Our resources can be scaled up or down on-demand, and our services seamlessly bolt on to existing internal support capabilities.

We also provide project-based collaborations. Our statements of work are outcome-based, whether it be a short-term or long-term project. Regardless of how many people we dedicate to your project, you will always have continuity of service regardless of individual absence. And you will have access to a pool of highly skilled, multi-disciplined IT professionals.

We guarantee results that will exceed your expectations. Contact us now to discuss your requirements and see how we can help.

IR35 and Off-payroll Working
IR35 and Off-payroll Working

Leave a Reply