IR35 came into effect in 2000 but in recent years it has undergone a major overhaul. In April 2017, changes to off-payroll in the public sector had a major impact on contractors, recruitment agencies, payroll providers and private sector organisations. This legislation is now going to be rolled out into the private sector in April 2021. Failure to prepare could have a devastating impact on accountancy practices who have a large number of contractors and freelancers on their books. However, Churchill Knight Umbrella has the perfect solution.

Keep reading to find out more about IR35, off-payroll legislation and our proposal to help your business cope with the rapidly approaching changes.

IR35

IR35 was introduced by HMRC in 1999 and came into effect in 2000. The legislation was designed to stop ‘disguised employees’ underpaying tax and National Insurance Contributions (NICs).

Genuine contractors working through a limited company are able to pay themselves with a combination of salary and dividends – an arrangement that is more tax efficient than PAYE. However, HMRC identified a number of disguised employees who were taking advantages of this tax break, despite working on the same roles as people in permanent employment (who were not able to benefit from the same tax breaks). The only thing that was different is the fact they were working via an intermediary (in most cases, a limited company, also referred to as a personal service company).

Off-payroll in the public sector

Up until April 2017, all contractors – both public and private sector – were able to determine their own IR35 status and pay themselves accordingly. However, in April 2017, new rules were introduced called “off-payroll in the public sector”. These meant that contractors in the public sector had to rely on their end-client to determine their IR35 status for a contract, and they no longer had the freedom to determine their own.

Off-payroll in the private sector

Off-payroll legislation will be adapted and rolled out into the private sector in April 2021 (off-payroll in the private sector). Similarly to the public sector, contractors and freelancers will not be able to determine their own IR35 status after April 2020. Instead, they’ll have to rely on their end-client to give them an accurate and fair assessment. However, this only applies to contractors and freelancers working for large and medium-sized end-clients (unlike off-payroll in the public sector that applies to all-sized businesses).

How will accountancy practices be impacted by off-payroll in the private sector?

As we witnessed after off-payroll in the public sector was introduced a few years ago, the upcoming changes to the private sector will heavily impact accountancy practices like yours. Here are a few things that you must take into consideration:

• Many private sector contractors (possibly up to 80%) will be required to use an umbrella company for their payroll in the build up to, or shortly after April 2021. This is likely to be caused by their end client initially taking a blanket approach to IR35 assessments and deeming every temporary worker as inside. Although this may not be “fair”, we spoke to plenty of contractors who almost overnight were told they needed to use an umbrella company because they’re suddenly “inside IR35” (after off-payroll in the public sector came into effect).
• However, just because a limited company contractor using your service is told they need to use an umbrella company, it doesn’t mean their limited company will become obsolete.
• Once time passes, private sector organisations are expected to become more accustomed to off-payroll legislation and may create positions that are listed as either “inside” or “outside” IR35. This will encourage some contractors to seek roles outside IR35. This is what happened in the public sector – roles started to be advertised as either “inside” or “outside” IR35.
• If you do not prepare your clients for what is coming, they may be angry with their end client, recruitment agency and your accountancy practice. After all, their take home pay could potentially be reduced by up to 25% and wouldn’t you be annoyed if this happened without any prior warning and time to prepare?
• By providing your contractors and freelancers with information on the upcoming changes and a solution that will eliminate any confusion and help them understand their payroll, you will be able to hold on to them well beyond April 2021.
• Partnering with an umbrella company does not mean you are losing your clients. Instead, you are providing them with a temporary solution to their payroll whilst they either look for roles outside IR35 or their client has time to correctly assess their contract role.

Off-payroll in the private sector will have a massive effect on accountancy practices in the UK. However, partnering with us will help eliminate the risk of losing clients.

Here are a few reasons we should start an affiliation:

• We can enable you to offer umbrella services to your clients – should they need it. This will help retain those who may decide to move to a provider offering both limited and umbrella services. Now you can offer both – without any hassle whatsoever.
• By partnering with us, you can offer your clients support in the build up to April 2020. By educating them about the upcoming legislation and reassuring them about their payroll, they’re sure to be grateful.
• Your clients needing an umbrella company can still keep their limited company open with your accountancy service. We will make this clear to them when discussing our affiliation with your business. We are not looking to steal your clients. We are simply offering them a reliable and temporary umbrella service.
• We will introduce ourselves to your clients as an affiliate to your business. Everyone will be warmly welcomed and given an accurate take home pay projection. Should they decide to use our service, we can have them registered and ready to go in no more than 15 minutes. You will be kept up to date with the progress of your clients that you refer to us.
• The umbrella service we offer is outstanding and all of your clients will be able to take advantage of a special weekly margin, free £25 million insurance, Employee Benefits and access to our exclusive discount scheme.
• Your clients are free to hop on and off our umbrella payroll as they please. There are no hidden fees and no limit to the amount of times they can use us. If they only need us for a total of one or two weeks – we’d be delighted to help them.
• As a thank you for referring your affected clients to us, we can offer up to £100 per successful referral. For more information, please get in contact.
• Let us know if you would like some in-house training about the upcoming legislation and we’ll arrange a time to pop in and educate your staff.
• With over 20 years’ experience and a Professional Passport accreditation, you’re partnering with a compliant and trustworthy umbrella company that you’ll be proud to call an affiliate.
• Do you have a specific requirement that we haven’t mentioned above? Please get in contact with us to discuss how we can help you. Churchill Knight Umbrella has been building tailored partnerships with accountancy practices since 2016.

To find out more, please download our free guide and schedule a call / arrange a meeting for a convenient time. You can also send us a message below or give us a call on 01707 871622.