How to Mitigate the Influence of IR35

IR35 is not going away. Complexities simplified.

 

With IR35 coming into force in the UK . . .

42 % of IT businesses expect talent shortages
41 % of companies are reviewing their procuring strategies 
74 % of organizations are not ready for the new rules
35 % of businesses don’t have an operations plan

IR35_Mockup

IR35 private sector legislation changes

... coming into force with a recent postpones on April 6, 2021, can have quite an adverse effect on UK resident companies. Having clients in the United Kingdom, Avenga understands all the painful issues IR35 inflicts on our partners. The main trouble they face these days is the talent gap and losing key individuals in critical business positions.

In our Whitepaper "How to Mitigate the Influence of IR35" you'll find:

check_ir35IR35 Challenges 

check_ir35IR35 Self-Check

check_ir35IR35 Survival-Guide 

check_ir35Avenga "Power of Six Solution" 

 

Download Whitepaper

IR35 FAQ from our customers

What is IR 35?

IR35 or the Intermediaries Legislation is a set of tax laws in the UK, designed to stop workers and companies that hire them from avoiding taxation by fraudulently claiming to be contractors, but who would be an employee if the intermediary was not used.

IR35 legislation currently only applies in the public sector, but it will expand to the private sector and will require medium to large-sized businesses to determine whether a contractor falls inside or outside IR35 status.

Due to the pandemic and global economic situation, the government has postponed the reforms to the IR35 tax rules until April 2021 attempting to reduce the pressure on tax-payers amid the Covid-19 outbreak.

When does IR35 apply?

The Off-payroll working rules (IR35) was implemented in 2017 for the public sector and will reform the private sector in April 2020 2021.

Update: On February 7th, 2020, HMRC announced a change to the off-payroll working rules. The IR35 rules will now apply only to payments made for services provided on or after, previously, 6th April 2020, now in the revised version, on or after 6th April 2021. This means that businesses will only need to determine whether the rules apply for contracts they plan to continue beyond 6 April 2021. Previously, the rules would have applied to any payments made on or after 6 April 2021, regardless of when the services were carried out.

What potential risks does IR35 entail?

  • Project delays or even shutdowns due to contractors leaving.
  • Contractors' reluctance to be employed by client organizations.
  • Jeopardized scalability of projects and organizational agility due to losing niche skill sets.
  • Potential complications in retaining key personnel.
  • Increased costs and losing control of delivery timelines due to talent market shortages.
  • Overall negative impact on the business, brand and shareholder value.

What does inside IR35 mean?

According to the off-payroll working rules (IR35), introduced by HMRC in 2000, if a contract is inside IR35, an income tax and National Insurance Contributions are paid, just as employees do. An individual who is an employee for the end client and a subject to PAYE is considered operating inside IR35.

For the public sector contractors, their end clients are responsible for determining their IR 35 status.

For the private sector contractors, medium-sized and larger clients will be responsible for determining their IR35 status starting from April 2021, according to the latest government’s adjustments.

What does outside IR35 mean?

Being outside IR 35 applies to organizations/individuals who operate as genuine businesses able to pay salaries, receive dividends and remain responsible for taxes. When a contract is outside IR35, HMRC considers it a legitimately operating contractor, a tax-efficient business responsible for managing taxes as normal.

Am I inside or outside IR35?

In general the off-payroll working rules can apply if a contractor provides their services through an intermediary.

HMRC has launched an online employment status tool (CEST) for contractors to clarify their liability under IR35.

Power of Six Solution

Our goal at Avenga is to simplify complexity. In this Whitepaper we explain our strategic approach to mitigating the IR35 impact which is comprised of a six-component solution:

 

no1-2
 
Scaling and rapid response
to critical talent gaps
 
no2
 
Financial flexibility to minimize
the impact on the budget
 
no3
 
Retention of key client
team members
 
no4
 
Commitment to the
program timescale
 
no5
 
Market and vertical knowledge,
as well as reputation and reference
 
no6

End-to-end
solutions
 

About Avenga

Avenga is a global IT and digital transformation champion that enables its clients to apply the huge potential of technology for a smarter and more sustainable future. Avenga has the technological expertise of over 2,500 experts at 19 locations in Europe, Asia, and the US. With projects along the entire value chain Avenga accompanies global corporations and mid-sized enterprises in their digitalisation. More than 350 clients rely on Avenga's solutions and services to achieve greater agility and faster market access.

 

 

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