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IR35: What, Why and When?

With the new IR35 changes looming, we look at what what the legislation involves, why it is being and implemented and how it will affect contractors in the maritime industry.

in April 2020, the new changes for ‘off-payroll working rules’ will come into place as the government look to ensure contractors that work like employees but operate via an intermediary, pay the correct national insurance, but how will this revised legislation affect you?

When do these rules come in?

The changes to the current Finance Act of 2000 come into place on the 6th April next year.

At Marine People we are happy to advise all of our contractors on any issues that you may have around the new rules, the key is to be proactive if you are considering taking contract positions post April 2020.

Why the change?

Currently, IR35 legislation states that Personal Service Companies (PSC) must ‘self-assess’ the contractors that they administer for, to ensure they are compliant with the law. HMRC however have concluded that there is widespread non compliance with the current rules and have introduced legislation that requires all medium and large businesses to assess their contractors. Small businesses that use contractors however will be exempt from the changes.

The phrases ‘inside’ or ‘outside’ IR35 may be ones you have heard quite a lot, these refer to whether a contracted role applies to the regulations on off payroll rules (inside) or whether the contractor will have to pay national insurance contributions (NIC) equivalent to that of a normal employee.

The legislation attempts to prevent individuals known as disguised employees from avoiding tax, working as self-employed contractors through a PSC even though they do the same job and have roughly the same conditions as an employee.

  Three key factors in determining IR35 compliance
  • Supervision, Direction, and Control: What degree of supervision, direction and control does your client have over what, how, when and where you complete your contract and day to day work?
  • Substitution: Are you required to carry out the work yourself, or you can you send someone in your place?
  • Mutuality of obligation: Is your client obliged to offer you work, and are you obliged to accept it?
How else can I prepare?

If you are really unsure going forward with a contract position prior to April 6th, you could seek a ‘Confirmation of Agreement’ between you and your client, this would ultimately protect you as the contractor from any irregularities as the new rules state that it is the clients responsibility to ensure their contractors are ‘inside’ IR35.

Another way to re-assure yourself that you are complying correctly with the new legislation is to get some second opinions from other contractors who may have experienced the same difficulties, has a forum which may be useful for speaking to other contractors.

For a basic outline of whether you are currently IR35 compliant in a contractor role, you can complete the test here, although this isn’t always definitive when it comes to investigating your tax status as a contractor.

We would always recommend speaking to an expert if you are unsure, many agencies that provide Personal Service Companies will usually be happy to assist you.