The recent addition to the existing IR35 legislation (a Government initiative) now puts the onus onto private companies to decide whether or not a contractor should in fact be employed and on the payroll. Historically, any freelancer or contractor employed to work on a project on a long-term basis, would normally receive payment once an invoice was submitted. However, this recent change states that in these circumstances the contractor should in fact be considered an employee and therefore paid via the company PAYE system.
These changes apply to any medium or large sized private company with a turnover in excess of £10.2million, employing over 50 staff or with a balance sheet of over £5.1 million.
The onus is very much now on the business to determine their IR35 responsibilities. Those that are using several contractors and self-employed professionals will need a change of approach and will in fact have to consider them as employees and pay them under the “off-payroll worker” rule.
Any business or recruitment company employing lots of contractors will need to start preparing for these professionals to now be classed as employees and they will be responsible for tax and national insurance contributions. This means a business will need to boost its cashflow in order to be in the position to cover these increased overheads.
Fortunately, there are some excellent business finance solutions available that will help any business to prepare for their IR35 commitments. To find out a little more please call us on 01993 706403 or e-mail enquiries@ngifinance.co.uk.