There has been a lot of chatter about using contractors since the changes to IR35 were first floated. For many, it has attracted negative connotations, primarily because it is not thoroughly understood what the changes will mean. Recruit 12 has always been heavily involved in the supply of short- and long-term contract staff to the engineering and manufacturing sectors so we thought we would set out the facts and take a look at the huge benefits that using contractors can bring to your business.
IR35 – the Facts
IR35 is the off-payroll working rules introduced by HMRC to make sure that workers, who would have been an employee if they were providing their services directly to the client, pay broadly the same tax and National Insurance contributions as employees.
The rules apply to workers who provide their services through their own limited company or through a third party or umbrella company. IR35 doesn’t apply to sole traders, however, rules for determining employment status do. Currently, IR35 for private sector end clients has been the responsibility of the contractor, but from April 2021, it will be the client who is responsible for assessing the individual’s employment status and disclosing whether they are inside or outside IR35.
Inside or Outside IR35 – What does it mean?
‘Inside IR35’ means that the contractor is considered an employee of the end client and therefore their income is subject to PAYE tax and National Insurance contributions. Some of the factors that could indicate your contractor is working inside IR35 are:
‘Outside IR35’ means that a contractor is operating as a genuine business with premises, their own insurance and website and work for multiple clients. Some of the factors that could indicate your contractor is working outside of IR35 are:
Which end clients need to know about IR35 rules?
IR35 rules will not apply to small businesses. In these instances, it will be the contractor who is responsible for assessing whether IR35 applies. The Companies Act 2006 defines a small business as:
So now we have ironed out the nuts and bolts of IR35, what are the benefits to your business of using contractors?
Contractors have long been used by businesses for a variety of reasons:
How can Recruit 12 help you with your contract requirements?
What should you do now?
If you think that using a contractor for specialist or one-off project or to provide temporary cover within your business, you need to speak to our team today. We have highly skilled contractors who are looking for their next project now and demand for these skilled engineers is growing. You can either contact our team by email firstname.lastname@example.org or by phone at 01527 834 612 or take a look at our website and use the ‘contact’ section.