IR35: Separating the myths from the facts

At our IR35 event in Manchester earlier this month, we sat down with Ashley Olliver (PayStream), to discuss everything you would need to know in preparation for the legislation hitting the private sector. He shared plenty of interesting knowledge and facts on IR35, which sparked up a lot of conversation at the event.

With so many questionable statements being made surrounding the change in legislation, he decided to separate the myths from the facts.

Clients must advise agencies about the IR35 status of assignments.

True

“As an end client, you must determine whether a role is inside or outside of IR35. The legislation is set out to make sure that the client is determining whether the role is inside or out before the contractor starts the job.”

If a client says a role is outside IR35 there is no risk to the agency in paying a PSC gross.

False

“The agency has the primary responsibility to make sure the correct levels of deductions are being made. The end client may become liable, if there has been a lack of reasonable care in determining IR35 status or if they have provided fraudulent information.”

If a client categorises a role as inside IR35 the contractor acquires employment rights. 

False

“IR35 is tax law, the only time the contractor would get employment rights is if they switched to a PAYE solution. That could be agency direct payroll or through an umbrella provider. An umbrella is a PAYE solution where the contractor becomes an employee of the umbrella itself. This allows a contractor to move from contract to contract, within one ‘employment’.”

If the client deliberately misleads an agency on IR35 status the client bears the tax risk.

True

“If a client deliberately misleads an agency, it would be considered as fraudulent. HMRC would take the view that you have not taken reasonable care and you have misled the agency. In some cases, HMRC may also take the view that the agency was also aware that the role was within the IR35 legislation.”