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4/6/21
IR35 Reforms: Are you ready?
Welcome
Guest Speaker: Jas Jhooty
to today’s webinar
The webinar will begin shortly…
Guest Presenter Introduction
Today we will Get Ready for IR35
discuss…
How BrightPay caters for IR35
Jas Jhooty - Director at emTax Questions & Answers
1
4/6/21
Latest news
Get ready for • IR35 reforms were delayed at the last minute in March
IR35
2020 as a result of the COVID crisis
• They have been postponed to commence in April 2021
• Some larger employers have already introduced blanket
April 2021 bans on PSCs
• This is the incorrect approach
• Leading to a talent drain
• Unnecessarily expensive
• With forward planning adhering to IR35 reforms is
achievable
HMRC estimates
HMRC have estimated that
You must be prepared to
change your contracts and
EMPLOYMENT
STATUS
they only expect to catch
working conditions if you
30% of the 500,000 PSC
wish to keep as many
contractors as being
contractors outside of IR35
deemed employees
as possible
3
2
4/6/21
Employment status – why does it matter?
Personal service
Who performs
and mutuality of the service
Self- obligation
Employee
employed Core
PAYE
Self
Employment
assessment
Status Tests Control test
What, where,
how, when
Class 1 & Class 2 &
employer
Class 4 NICS
NICs
Difficult to Easier to get What is the
deduct overall picture
a deduction
expenses for expenses The overall picture taking all the
factors into
account.
Mutuality of Obligation
• Overall
• In business on their own account?
• Equipment
• Provision of own equipment (or other staff) indicates self-
employment
• Financial risk
• Level of financial risk, including non-payment, costs
The overall “putting things right ”
• Entitlement to sick pay, holiday pay, maternity/paternity
Employee Employer picture pay etc.?
• Other work
• Obligation to • Obligation to provide • Do they / can they carry out jobs for other people?
personally perform work or pay a
• Sound management
at least some work retainer
• Can they profit from sound management of their business?
• Integration
• How integrated are they into the business?
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4/6/21
REMINDER OF • IR35 has been with us since 1999 but
CURRENT RULES compliance was very low
• HMRC estimate only 10% of those who
OFF-PAYROLL
should be applying IR35 actually do
• Off-payroll rules launched for public sector
from April 2017
WORKING Background • HMRC judge a success
• (extra £550m IT and NICs)
• To be extended to private sector, but not
until April 2021
• was expected to raise £1.2bn in
2020/21
CHANGES FOR PRIVATE SECTOR ROLL OUT
Consequences
of off payroll
• Fee payer is treated as employer of the worker
for tax, NICs and apprenticeship levy
rules applying OFF-PAYROLL
WORKING
• Deemed direct payment to PSC taxed as
worker ’s employment income and RTI applies
• Pensions and statutory payments don’t apply
• No Student Loan deductions
• Can’t set Employment Allowance against NICs
on deemed direct payments
4
4/6/21
• Clients are the Public Sector and medium
Fee-Payer and large businesses engaging workers’
services through an intermediary
• All clients are to be fee-payers until a Status
Determination Statement (SDS) has been
• From April 2021 the fee-payer is • Unless the fee-payer is a small private
Transfer of fee- made per contractor
responsible for
• deducting and accounting for all
sector business (or part of a group)
whose payer • The SDS must be passed down the labour
supply chain until it arrives at the entity
responsible for paying the worker. That
relevant payroll taxes
• including PAYE tax & Class 1 NICs,
• Turnover is less than £10.2 million
• Balance Sheet is less than £5.1 responsibilities entity then becomes the fee-payer
Apprenticeship Levy million • If the client does not make a SDS or fails to
• from any PSC workers who are • Employee count is less than 50 pass it down the supply chain, the client
remains the fee-payer
deemed to be employees, • Two of the above three conditions
presented Net of VAT invoices must apply
Status Determination Statements
Simplified information flow Client needs to make a SDS taking
No definition of what constitutes reasonable care
reasonable care on how the employment has been provided by HMRC
status has been arrived at
• Clients need to know the identity of the fee-payer
• To ensure the determination reaches them in If the client decides the original SDS was correct
long labour supply chains Worker has the right of appeal and the client they must provide full reasons
must respond within 45 days Otherwise a new status determination will be
• If the fee-payer is based offshore the required if the client agrees with the worker
responsibilities transfer to the next UK-based
entity If the client fails to obey the appeals process
they will be deemed to be the fee-payer A transfer of liability to the worker then occurs
unless the worker (or their representatives)
have committed fraud
5
4/6/21
Form IR35 Reform
What you should be doing now
Project Team
• Invite members from:
How to plan for IR35 • HR
• Finance
• Payroll
reform • Legal
• Procurement
• Discuss how to identify your PSCs
• Review of Supplier List
• Discuss favoured methodology for required SDSs
Decide Testing Methodology
What is best for your business
Choose Make Use Ensure
Some large volume contractor engagers have already decided to mitigate Choose what Make sure enough Advisable to use Ensure you have a
against any risk, they will move all contractors onto the payroll methodology is questions are HMRC’s CEST tool robust dispute
best for your asked to cover •As it comes with resolution system
organisation: every employment HMRC assurance that •Make sure you don’t
Expect a brain drain if you opt for this route status factor they will stand by the get caught out by the
•High-level review of result as long as you
contractual terms by 45-day time limit to
•To cover what happen have taken reasonable
HR/Legal respond
in reality care
You may decide to move the work completely off-shore where IR35 does •Get project team •Not just what the •You do not have to
leaders to input what agree to accept the
not apply contract stipulates appeal
happens in practice
If you wish to keep your overheads down, you will have to pick the best
testing methodology for your business
6
4/6/21
Ongoing use
What SDS
From April 2021
every new
contractor will
Some existing
contractors may
need to be
Your chosen
system will need to
be used on a
This is not a one-
off requirement
Methodology to use?
require a SDS reassessed continual basis
Manual assessments
Commercial SDS
software
Likely to Time Potentially Expensive
require consuming unreliable
outsourced
Employment
Tax Consultants
Inhouse expertise
will probably be
missing
74/6/21
HMRC CEST Keeping contractors outside IR35
• Has been updated, now much better
than their initial offering
• Free How to improve
your results
• Only methodology that comes with
HMRC assurance
• HMRC promise to stand by the results
as long as answers are truthful
Add more definitions to your standard substitution clauses
To minimise a Mutuality of
Stipulate that the contractor is responsible for both sourcing Each stage should last no longer
Obligation arising you should be
and paying the substitute
drawing up new contracts relating than 6 months
to each stage of a project
Substitution Project
focus
State that the engager has to accept a suitably qualified
substitute
clause
Workers must stick to the contract
Remove any references that the engager has the right to A set of deliverables needs to be
interview a substitute schedule and not agree to do any
defined in each contract
work outside of what has been
schedule/SoW
defined in the contract schedule
Find one instance where a substitution has actually been
allowed to happen so that it can argued that this is not a sham
clause
84/6/21
Alternate contractors
Maximum • Define the maximum period in which the
contractor has to deliver the agreed
services by
To safeguard yourselves even
further, do not re-engage the same
Having the contractor fend for
themselves for a period of time,
number of
will negate any possibility of a
• After this period stipulate a reduced contractor for the next stage of a
Mutuality of Obligation having
penalty rate e.g. 50% of the normal rate project
arisen
• This differentiates the worker from
hours/days
employees who do not suffer a 50%
reduction in their earnings for failing to
meet a deadline The contractor should be allowed
Similarly do not have any exclusivity
to work for multiple clients in the
conditions in the contracts
same period
Part and Parcel Allow the contractor to deliver the services
off-site in their own time
Make sure the contractor is perceived not to be part of your organisation
Do not give them any equipment, they must provide their own Unless they have to use your equipment for IT security purposes
Provide them with a different coloured lanyard than a member of staff
Other factors Change the focus from a
day rate to an agreed fee
Monthly retainers
drawing down on
this total fee can
for the completion of a set be agreed in the
of deliverables/project contract
Do not give them any staff management responsibilities
Do not invite them to any staff functions
Do not provide them with any benefits-in-kind Remove any references to a minimum
number of hours expected to be delivered
Do not provide them with any training (except for H&S)
94/6/21
Whatever SDS methodology you opt
for, you must get your contracts
reviewed and/or updated
Contract & Working Many contracts for services contain
Conditions Review Contract references commonly used in
employment contracts
Review
Our consultants can review &
update your contracts to bolster
their self-employed aspects
Dos & Don’ts of
Contracts
• Avoid naming the worker in the contract – implies personal service
• Don’t mention any line manager - control
• Make sure there is a clear end date
• Avoid lengthy notice periods
• Don’t have one set address as the work location
• Include a description of services – do not include a job title
• Avoid set working hours
• Don’t specify any overtime rates
104/6/21
Just as important as contract review
• This will contain the scope of work and the
commercial arrangements containing :
Review of
Need to find out what actually occurs in practice
The • A schedule containing the fee
arrangements
Working • Normally a fixed fee that is paid
Conditions
Completed by onsite project manager per role
Statement upon the completion of tasks or at
certain milestones
• details on the timeframes for
We can review the answers and advise on possible new
practices to minimise the no of contractors caught inside IR35
of Work completion
• and what the specific deliverables
outcome/output of the services will be
Aim is to devise an agreed template for a Statement of Work
(SoW) to accompany the updated contract
We have prepared a due
We can provide affordable
consultancy to assist you in
diligence checklist to
identify any PSCs that may
Contact us
How emTax dealing for IR35 reforms be hidden in your supplier
list
• Tele: 0345 548 3680
can help
We can write bespoke We can advise you on how • Email: enquiries@emtax.co.uk
communication emails to to change your contracts • Web: www.emtax.co.uk
send to contractors advising and working conditions to
them of the changes & how keep as many contractors
to prepare for them outside of IR35 as possible
114/6/21
IR35 in BrightPay
How BrightPay caters for off-payroll workers
+30
320,000 Businesses Payroll Software of 99% Customer Years’ Developing
in the UK & Ireland the Year 2018 & 2019 Satisfaction Rate Payroll Software
Reasons to Choose BrightPay
Batch Payroll Processing Employer & Employee Portals
Accounting Software Integration Pay Employees via BrightPay
10
Desktop-Based Available on Optional Cloud Activations Per Furlough Support Free Customer Support
Payroll Software Windows & Mac Add-On BrightPay Licence
Remote Working Award-Winning Payroll Software
124/6/21
Questions & Answers
Book a free
online demo
Jas Jhooty Rachel Hynes
Marketing Manager
Director at emTax
at BrightPay
Standard Bureau Example Monthly Bills
For individual employers. For payroll service providers. Monthly subscription based on number of employees
One employer Unlimited employers 1 employee £0.50 per month 100 employees £27.70 per month
Unlimited employees £199 Unlimited employees £499
For large em ployers For large payroll bureaus
5 employees £2.10 per month 250 employees £57.70 per month
One employer Up to 25 employers
Up to 25 employees £149 Unlimited employees £399 10 employees £3.90 per month 500 employees £97.70 per month
For m edium -sized em ployers For m edium -sized bureaus
25 employees £8.70 per month 1000 employees £157.70 per month
One employer Up to 10 employers
Up to 10 employees £99 Unlimited employees £249
For sm all em ployers For sm all payroll bureaus 50 employees £15.70 per month 5000 employees £477.70 per month
NOTE: Prices are per tax year and exclude VAT.
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