IR35 guide for agency workers and contractors
1.Overview
IR35 is anti-avoidance tax legislation designed to tax ‘disguised’ employment at the same rate as normal employees. In this context disguised employment means workers who receive payments from a client via an intermediary such as their own limited company but who would have been classified as employees if they had been directly employed directly.
IR35 Legislation:
- Cheshire East Council must provide a Status Determination Statement (“SDS”) to the individuals for every contract/assignment active on or after 6 April 2021
- Cheshire East Council are required to have a process in place to deal with disputes from workers who disagree with the status determination statement provided to them for the role/work being carried out. Further details are provided below.
- If an incorrect determination is made, the tax liability resulting from the incorrect IR35 status will be assessed and the Council may become liable for the employment taxes as well as employer NICs.
a. Bloom contractors/other contractors/Personal Service Companies: The HRMC reserves the right to challenge judgment if it believes answers have been answered incorrectly or that the situation is contrived.
b. Comensura: If we fail to supply an SDS to any agency workers being paid on an LTD rate, or via an umbrella company, through Comensura (inside IR35) and the appropriate party fails to recoup PAYE and NI, we can become liable to cover both employer and employee PAYE and NI, even though we are paying an enhanced amount to cover PAYE and NI Contributions.
If you have any Engagements that are not through Comensura or Bloom, including engagements subject to a WARN , please contact Emma Cornwell and Janet Ellison-Jones.
Contractors
The majority of contractors are brought in through Comensura under a Job Description and a Person Specification. HMRC would view these individuals as “disguised employees”, since they are performing roles for which the Council might recruit staff permanently.
HMRC may argue that these individuals should be taxed under the PAYE system, as are employees.
HR have assessed each of the roles within our catalogue with Comensura and determined which of these should be subject to PAYE tax. Any new roles raised through Comensura post April will have already had their tax status assessed based on the job title ordered through CNET.
Managers must understand you are procuring services, not employing people.
If there's doubt whether a contract falls within IR35, there will be the opportunity to provide evidence to demonstrate that a Statement of Works may be issued to enable the work to fall clearly outside of the Regulations.
The Employment Status Evaluation Tool will help you to determine the tax status of individual contractors.
The Council uses BLOOM, who are a neutral vendor organisation that procures professional services on behalf of the UK public sector.
Disputing IR35 Status:
If you, the worker/business, dispute the IR35 determination provided please stipulate details of the reason(s) why to: DisputeIR35@CheshireEast.gov.uk.
The Dispute IR35 team will respond within the time limit of 45 days, in writing, to the worker/business with the outcome of the review of the dispute. The decision will either confirm the original SDS is upheld, or, if it involves a revised SDS or conclusion, a new SDS must be provided in line with the arrangements outlined above.
Guidance and additional information
Contact
BLOOM - IR35-Queries@bloom.services