We are rapidly approaching the two-year mark for the IR35 reforms, which came into effect on 6th April 2021. The reforms impacted the way that the IR35 rules are administered for PSC’s operating in the private sector. Stonebridge today, provide agencies with further understanding and take a look at their obligations with the rules.
What are my clients’ obligations?
If your client is classified as a medium or large sized business (not ‘small’), the legislation states that:
As the end-user* of the service, your client is required to produce a valid Status Determination Statement (SDS)
This SDS will confirm whether the Personal Service Company (PSC) is engaged inside or outside of IR35.
Your client is obliged to issue this statement to you and the individual worker.
What are my obligations?
You are required to abide by the SDS ruling and to pass it down to your payroll provider (umbrella company) as part of the legislation.
If the SDS deems the assignment to be inside IR35, you are responsible for passing the determination on to your payroll provider (umbrella company), as the fee payer**, in order for them to account for and pay the related tax and National Insurance Contributions (NIC) to HMRC.
If the SDS deems the assignment to be outside IR35, you are responsible for passing the determination on to your payroll provider (umbrella company), as the fee payer, in order for them to facilitate the payment to their Limited Company (if paid by them).
Failure to pass on the determination will result in the tax and NIC liabilities resting with you.
I haven’t received SDS’ for our Ltd workforce from my client
If you have not yet received an SDS from your client, it is important to request this information. Make arrangements to explain the changes and discuss the liability that currently sits with them as they may be unaware.
Until your client passes the SDS to you, the tax and NIC liabilities rest with them.
I have received SDS’ for our Ltd workforce from my client but I’m unsure what do with them
In order to ensure that you move the tax and NIC liabilities resting with you to your payroll provider (umbrella company), please ensure that any SDS for PSCs are sent to them at the earliest convenience.
Where there has been non-compliance further down the labour supply chain, tax and NIC liabilities may potentially be transferred back up to the end-user, so it is important to ensure that you are compliant with the legislation.
If you have any further questions regarding this post or the legislation changes in general, please email us at firstname.lastname@example.org
*End-User refers to the client company where the worker is providing a service.
**Fee Payer is who pays the Personal Service Company, which may be the end-user, a recruitment agency, or a payroll provider (umbrella company).