IR35 – In, out shake ….it all about!

IR35 – The phrase that now fills many recruiters and HR Managers with dread !

Clients have now even started requesting that we promise (declare in a written statement) that we will not suggest IR35 candidates to them due to changes in April 2021!

I have a curious nature and do think its best to understand our fears – so I have set about trying to understand what this all about: Here is what I think I understand …..:

April changes

Essentially – the big change is the introduction of the “SDS” – Status Determination Statement – in the good old days – contractors could tell you that they were inside or outside IR35 and you could take their word for it. NOW, the Hirer (our client) has to tell us, on a SDS, if the role is inside or outside of IR35 and then we pass that information on to the contractor.

A role outside IR35 is one that a supplier would perform. That supplier has other clients and does not have a vested interest in your company. The supplier sets their own hours and works under their own “Supervision, Direction & Control” (3 very important words – take note!). A contractor outside of IR35 is paid upon invoice, outside of payroll and every quarter we report their earnings to HMRC via an intermediary report.

A PAYE employee is paid through our payroll system and we report their earnings on our weekly FPS.

A contractor (so candidate with their own limited company) can still work for you if the role is deemed to be inside IR35 but you set them up and pay  them in a crazy mix of the above two. So in my case, I use Sage payroll and I would now enter the contractor on that as a “deemed candidate” (not doomed) and that would allow me to make deductions for tax and national insurance and pass on a net payment to the contractor. In the meantime, my online timesheet system will be generating a self-bill invoice that displays the gross and net amounts. I do not pay the candidate holiday pay.

So far, my online timesheet people and Sage have been a little vague on the full details as one person put it  – most agencies are trying to avoid Inside IR35 situations!

Lets not run and hide people !

FULL Disclaimer – I am not saying any of the above is factually correct – don’t quote me on it! But this is what I think to be true – this is my mind dump and I will update this blog in due course with any corrections.