1. Intermediaries Legislation
IR 35
Intermediaries Legislation

2. Summary Applies to payments made from 6 April 2017
Public Sector bodies
BSU to determine whether deemed employment relationship (likely to include consultants and any supply of staff)
Where Intermediaries legislation applies, BSU accounts for basic rate, Employee NIC and Employer NIC on payments made to Joe Bloggs Limited
For staff supplied by agency – as bullet 3 above, but Agency accounts

3. Impact Payroll costs – Income tax, Employees NI, Employers NI
Apprenticeship Levy (0.5% of payroll)
Interest and Penalties where applied incorrectly
RTI Reporting – Payroll
HESA Staff Record?

4. Establishing Employment Status for Tax purposes
Substitution
A key test of employment says that if a contractor is not allowed to send a replacement, or substitute, to take their place to deliver the contract, this probably means that the contractor is really an employee. Some contracts include a clause specifically disallowing a right of substitution, potentially putting the contract inside of IR35.
Right of Control
A key test of employment, and therefore IR35 status, is whether the contractor is controlled by the client. If the contract includes a clause that paints a picture of control, and may even include a statement confirming the contractor is under the direction and control of the client, there is a greater chance that the contract will be found to be inside IR35.
Financial risk
If the contract states a set number of hours per week to be worked with an hourly rate and the contractor does not have a defined deliverable within a specified period, or a clause stating that mistakes must be rectified in the contractor’s time, then the contractor can be deemed not to be taking a financial or business risk. This implies the contractor is not in business in their own right and is probably a disguised employee.
Equipment
A contractual requirement for the contractor to use only the client’s equipment onsite could be interpreted as a lack of financial and business risk, particularly if the contractor has not bought any equipment of their own through their contractor limited company. This can be a reason for a contract to fall within IR35, but only usually in conjunction with other factors 
Part and parcel of organisation e.g. address
If the contract specifies things like the contractor being allocated their own office, or is integral to the management chain of command with a manager and possibly staff of their own.

5. HMRC Employment Status Service (ESS)
New HMRC tool :
New guidance:
A number of question based on personal service, control, financial risk, part & parcel of organisation
Output is on-screen decision that can be saved as pdf.
HMRC will abide by decision if correct information provided

6. Summary Payroll Obligations
PAYE & NIC deductions to be made from Invoice value, net of VAT, and excluding cost of materials (but not home to work commuting costs)
Payroll to issue P45 to worker
No obligations for the Payer
Statutory Sick Pay
Statutory Maternity/Paternity/Adoption pay
Statutory redundancy pay
NMW/LW
Pension auto-enrolment
Pension contributions
Annual leave
BUT BSU must respond to queries relating to employment status within 31 days or it is deemed to be the payer

7. Establish Current Position
Identify who engages off-payroll workers
Identify at risk engagements – including agencies
Review supplier lists
Create New Supplier form
Communicate with suppliers – ask suppliers to clearly identify materials and expenses on invoice
Review engagements and consider deducting employers NIC from invoices up to 13.8% where appropriate, and Apprenticeship levy 0.5%
Payment terms – invoices need to be processed promptly

8. Process
Before contract is agreed manager asks contractor to complete new supplier form
The manager then completes HRMC ESS check using information from new supplier form
If ESS states “unable to determine tax status” – discuss with Finance
Print record of assessment – save as .pdf
Send assessment .pdf to
New supplier created
Manager notifies contractor of IR35 status
For deemed IR35 contractors, manager asks contractor to provide:
National Insurance number
Date of birth and personal address
Bank account details
Order raised and invoice approved as normal
Prompt approval of invoice required to ensure timely payment

9. Implications What does it mean for contractors caught by IR35?
Pay tax and NIC earlier than would normally do
May feel that they end up paying more tax – because as a company they may be able to off-set other expenses (capital allowances etc.)
Pay and TAX/NIC deductions will be included in workers self assessment tool
There will be no double taxation
If IR35 applies Contractors may:
Accept the deductions as an inevitable consequence of government changes in taxation rules
Increase their fees to BSU
No longer wish to work for BSU

10. Assessment - A

11. Assessment - B

12. Assessment - C

13. Payment example - A

14. Payment example- B

15. Payment example - C