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IR35 FAQ

La Fosse is committed to the highest standards of candidate care. This extends to informing contractors about new legislation, making sure we are ready in advance when it comes to refining our process and providing options for you. 

To achieve this, we have been following developments closely – through our membership with APSCO - and have taken advice from several sources: from employment and tax lawyers; through to clients and other recruitment companies. 

Having said that, we also want to make it completely clear that the implications of IR35 are not yet known. And the experience in the Public Sector is that the rules are not definitive. As such, while we make every effort to keep this accurate and up to date, these are guidelines, so don't rely on them – seek independent legal advice if you need to. 

What is IR35?

IR35 (or the Intermediaries Legislation) is intended to combat incorrect payment of tax by workers supplying services to clients via an intermediary (through a limited company for example), where the relationship with the client would be that of an employee were it not for the fact that there is an intermediary in place. In such a case, the worker should pay tax on a PAYE basis, as an employee does. 

How is an IR35 determination decided?

There are many factors which can determine whether you are inside or outside IR35. It's not always dependent on what's written into your contract, but more on what happens in working practice.

Take, for example, a builder who you've contracted to build an extension on a house. There are certain constraints on their work such as where you'd like to extension built and their obligation to carry out the work at certain hours of the day, but otherwise it’s down to the builder as to how the work is done. It's also possible for them to send a replacement builder to complete the work, which you wouldn't mind, providing the work is completed on time and to specification. They also have no obligation to accept further projects from you nor do you have to offer any.

 By contrast, employees, or those deemed to be employees, are usually required to turn up to a certain location and work within certain hours and are directed by their manager on how the work should be completed. Once a task or project is finished, they'll expect another one to do and the employer will expect them to continue working. 

What if I think my assignment is outside, but my client or agency thinks its inside IR35?

The responsibility for making this assessment will sit with person making the payment - so either the client or the agency (or, often, a combination of the two). So, it is their decision, not the worker's.

How will I know if my contract is within the scope of IR35?

Status should be decided on a case by case basis and there will be no "blanket assessments" made across a client, role, or agency contract. The Government have devised this online tool (CEST) in which a series of questions are asked concerning the working practice of your contract, which will be used to determine your status. The legislation requires the end client to complete these questions in relation to each new contract. They have to ensure these questions are answered accurately and with reasonable care and it will be La Fosse's responsibility (as the fee payer) to ensure compliance. HMRC have stated that the results of the CEST tool can be relied upon providing that the answers to the questions reflect the working practice of the assignment.

What happens if I'm deemed inside and what are my options?

If your status is deemed to be in scope of the regulations, you'll need to pay tax and NI contributions as if you were employed. This responsibility will lie with La Fosse to ensure the right payments are being made.

What if I work through an umbrella?

If you're already contracting via an Umbrella company, you will not be affected by IR35 as you will already be taxed under PAYE.

To find out more information, please contact your relevant LFA consultant or visit the government website.

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