You may have read our recent blog post looking at the ins and outs of IR35, we now have a little more information on what IR35 means for pharmacists. We also have a blog post that takes a closer look at working as a locum alongside full time employment and dives a little bit deeper into personal finance management.
Status Determination - Inside V Outside IR35
The contractor is considered for tax purposes an employee of their client subject to PAYE
The contractor is operation as a genuine business and maintains responsibility for their tax and national insurance
The client is responsible for determining IR35 status. They must provide a status determination statement both the contractor and party directly engaging the contractor - the fee payer
If the role is determined ‘Inside IR35’ the fee payer is responsible for deducting the relevant tax and national insurance contributions at source
If the role is determined ‘inside IR35’ the contractor will be paid after the relevant tax and national insurance contributions have been deducted
What is IR35 - The Off-Payroll Working Rules
- IR35 - the common term for the intermediaries legislation
- It was introduced in 2000 to address tax avoidance by individuals working in the role of an employee but through an intermediary, such as a limited company
- The aim is to tackle the problem of ‘deemed’ employment. This is where organisations engage workers on a self-employed basis, usually through the intermediary, rather than on employment contract, so they become ‘deemed’, or ‘disguised’ employees.
- Historically limited company contractors, also known as ‘personal service companies (PSCs), have been responsible for determining their working status tax purposes
- The new rules apply to payments made on or after 6th April 2020
IR35 Status Determination
The assessment to determine the IR35 status of contractor role takes into account 3 principles:
- Control - what control does the client have over what, how and when the contractor completes work
- Substitution - is personal service required or can they send a substitute in their place?
- Obligation - There is a mutuality of obligation between an end-user client and contractor if the client is obliged to provide paid work and the contractor is obliged to accept and complete work.
Stay tuned for further information on IR35 or get in touch with our expert team to learn more.