IR35 Legislation

What is IR35?

IR35 is the name given to the government’s tax legislation which focuses on identifying ’disguised employees ‘, being individuals who are providing services to a client through an intermediary company, such as a PSC, but whose relationship with the client would be one of employment were it not for the presence of the intermediary. Where this is the case, the IR35 rules require the intermediary to deduct and make payment of the equivalent taxes as would be payable by and for an employee.

What are the key changes that affect me?

From 6th April, responsibility for determining if your assignment is caught by IR35 will shift from your PSC intermediary to the public sector client that you are supplying your services to. Where it is deemed that the rules apply, Magisters Education will calculate the applicable PAYE tax and primary NICs, deduct these at source from your PSC’s fees and pay these directly to HMRC on your behalf. Where it is decided that your assignment is outside IR35, your PSC will charge for your services as an intermediary company and no employment taxes will be payable.

How will the decision-making process work in practice?

The public sector client will first determine whether a particular assignment is inside or outside IR35. A new digital employment status tool, developed by HMRC, is expected to be available for this purpose from the end of February. The client will then be responsible for notifying Magisters Education of its decision, along with written details of the relevant circumstances and assessments upon which it has reached such a decision.

What are my engagement options with Magisters Education going forward?

If your assignment is deemed to be inside IR35, Magisters Education is able to offer the following engagement options for you to choose from and we are happy to provide more information on request:

1)  Move to a PAYE engagement via a contract for services with Magisters Education,

2)  Move to an umbrella model – Magisters Education has an approved supplier list (ASL) of umbrella companies who will support your transition to your chosen Umbrella should you wish to use this option,

Of course, if your assignment is outside IR35, the above options are still available at your request, or you can continue to work via your PSC outside IR35, subject to completion by both the public sector client and yourself as the individual supplying the services of HMRC’s decision tool and provision of the decision by the tool as evidence to Magisters Education that the assignment is out of scope.

Where can I find further information/guidance?

Further information can be found on the Government’s own website under the following link:

https://www.gov.uk/guidance/off-payroll-working-in-the-public-sector-personal-service-companies

Please note that the legislation is still in draft format and may be subject to further amendment. However, given the activities and timescales involved in ensuring all ongoing assignments are compliant with the off-payroll rules by 6th April we are in a position where we must press ahead with the changes based on the guidance provided.

An accountant or tax specialist may also be able to offer further advice or guidance on this matter. Magisters Education will issue further communications to you once the status of your assignment has been confirmed by the public sector client.