By: Surya Patra (LinkedIn)
As IR35 tax legislation takes effect in the UK from 6th April 2021, the contracting options for the UK contractors are getting limited. There have been a number of articles and write-ups in the media on this topic explaining what IR35 is and its implications to the UK contractors with the underlying effect on contracting market. Without going into those aspects further, in this blog, I would like to focus on the options available to the UK contractors in this changing scenario, with particular emphasis to the contracting opportunities available with our clients (as appearing on the Vacancies page of our website).
Based on the nature of employment of our contractors with our clients, all our UK contractors will be construed as inside IR35 as long as they continue to invoice under their UK registered limited company. In this scenario, given the nature of engagement of the contractor at the client site, the contractor’s payroll company (the Agency) will classify the contractor as being inside IR35. Consequently, the Agency will be obliged to processing monthly payroll for the contractor in accordance with the HMRC PAYE norms. As a result, the contractor will be subject to paying taxes at standard PAYE rates as per HMRC rules.
Please note however, that, since currently all our contract positions are based in Ireland, the UK contractors have the option to set up a limited company in Ireland (and invoice under the new Irish company) or work under an Irish Umbrella company who would take care of their PAYE compliance per Revenue (Irish Tax Authority) norms.
Either of the above options will ensure that the contractor is no longer within IR35 and doesn’t have to pay HMRC PAYE taxes. By far, these seem to be the popular and straight-forward options, but there are other possible ways to legally stay outside of IR35, for which the contractors are advised to consult their tax consultant.
PS – This blog only provides a simplistic view of the topic. The UK contractors are advised to seek expert opinion from their tax consultants and make informed decision regarding IR35 and its impact on their set up.
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