Advice for Contractors

The government have announced a delay to IR35 in light of the Coronavirus outbreak. But what does this mean for PSC contractors? Here we answer some of your questions to help you make the right decision in light of this update.

REMEMBER – IR35 has been around for 20 years. The April changes would have just shifted liability to private sector businesses instead of the individual PSCs. The same liabilities will exist, but responsibility will stay with the PSC for a further year.

The changes will now take place on 06 April 2021.

You need to be careful in this situation. Yes you can continue to use your PSC. However, if you are subsequently determined to be inside IR35 now but continue to be paid through your PSC (which some private sector businesses will now be happy to do as they are not taking on any new liability), you could find yourself liable for employment taxes should HMRC investigate in the future.

We would suggest you contact the company you are contracting to and ask if you are inside or outside IR35. If you are outside of IR35 you can continue to operate using a PSC. If you are inside IR35 we would recommend not using a PSC for this role. Any employer tax liabilities would be the responsibility of the PSC if HMRC were to investigate. We offer a number of payroll solutions which offer a compliant pay rolling solution.

Some institutions such as banks placed blanket bans on using PSC contractors. Time will tell if they reverse this decision. With the rules delayed, they may well decide to continue with the ban on PSC engagements considering their investment in the changes to date.

The alternatives to PSC are; to go on ‘end client’ payroll or via outsourced Umbrella or PAYE payroll.

You’ll still need to consider your employment status to understand the likelihood of being investigated further down the road. You can continue to use your PSC or set up a new one if you’ve already closed.

When the government announced that IR35 would have a soft landing, this meant that while tax liabilities would still have to be paid, no penalties or fines would be applied while businesses readjusted to the new rules. They may decide that with an extra year to prepare, the soft landing is no longer required, meaning that fines or late penalties may apply in the future.

Providing the company has not been struck off by Companies House the company can be operational again. There can be a small fee to Companies House for this.

Reopening your PSC can take time (2-3 weeks) and will incur a fee of £100 to Companies House. It may be simpler and more cost effective to open a new PSC. You can use a similar name if available or just make a minor change to the closed PSC name.

People Group can open a new company for you at no charge, although you would need to subscribe for our accountancy services for a minimum of 3 months.

If your old PSC has closed, it will be quicker and more cost effective to open a new PSC. You may be able to use a very similar name to your previous one if available.

Our specialist team of accountants can help you in every aspect of setting up and running your company. Please contact or speak to your accountant.

IR35 Status Determination – Decision Tree

Still unsure about the decision process surrounding IR35? We’ve created a simple decision chart that can help you determine where you stand with your current and upcoming contracts. Take a look at the helpful PDF and get in touch if you have any questions.