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What Recruiters Need to Know About IR35

IR35

If you’re a recruitment consultant, you obviously don’t need to be an expert on IR35, but you do need to understand it in enough detail to explain the broad strokes and answer common questions about it. Whenever we raise this topic with recruiters, it’s rare that anyone can explain IR35 in detail, which means those recruiters who can have a real advantage as trusted experts for both clients and contractors. In this article we’ll explain what recruiters need to know.  

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How IR35 affects your contractors 

The legislation concerns the employment status of contractors who trade through their own Limited company. Where your contractors are already using a Limited company, or are considering it as an option, they need accurate information about IR35 as it relates to the assignment(s) in question. More specifically they’ll need to know if the client’s status determination puts them inside or outside, and they’ll need to understand what that means in terms of running their Limited company.  

Advising your contractors:  

  • IR35 concerns whether your contractors are in business on their own account (Outside) or employed for tax purposes (Inside) 
  • The end client will provide a status determination statement, stating whether the contractor is inside or outside IR35, and the reasons for this decision 
  • If they're outside, you can pay their Limited company gross, and they are free to pay themselves according to their accountant’s tax planning advice 
  • If they're inside, you (as the free payer) must deduct PAYE tax and National Insurance from any payments made to their Limited company 
  • Umbrella company employment is often a better choice for contractors who are inside IR35 
  • Contractors working outside should follow best practice and gather evidence in support of their status on an ongoing basis 

How IR35 affects your clients

Most end clients are now responsible for determining IR35 status – the exception being those who are classed as a small private company. Those affected should already be aware of it and how it affects them and will expect you as a recruitment expert to be able to discuss and resolve issues and questions. Some, particularly those who have not engaged many contractors in the past, may seek your advice and they will need you to refer them to an expert who can offer specialist guidance. 

Because this is key legislation sitting in the recruitment space, your clients will expect you to know about it and if you can’t discuss it with them, you’re missing an opportunity to reinforce your position as their trusted advisor.  

Advising your clients: 

  • Unless they class as a small private company, your clients must determine the status of any contractors they engage 
  • They must provide you (the fee payer) and the contractor with a status determination statement, which should include the reasons why they have arrived at that status 
  • Each contractor must be individually assessed for each contract 
  • Inside IR35 decisions increase costs and make recruitment more difficult, so it’s vital that IR35 status is assessed correctly, to allow genuinely independent contractors to work under the correct status 
  • IR35 status determinations are complex and require expert handling. Most clients will need help from compliance experts 

Do you need IR35 training?

If you’re not confident that you, or your colleagues or staff, would be able to explain IR35 to your contractors or discuss it with your clients, you may need to arrange training. If you’re not sure, try answering these three questions:

  • What is IR35?
  • What’s the difference between contractors who are inside or outside?
  • How does IR35 status affect a contractor’s take home pay?

If you have any trouble answering any of these in a way that would satisfy a contractor or client, then you would almost certainly benefit from training.

Where to go for help

Having decided that you need to arrange training, the next step is to contact a compliance expert, like Orange Genie Compliance, to arrange it. Our experts can provide online training sessions at your convenience using the platform of your choice and they’ll be happy to answer any ongoing questions you might have once the training is complete. Click here to find the latest IR35 news

If you have any questions, or if we can help in any way, please call our expert team on 01296 468 483 or email info@orangegenie.com.

 

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