Breaking down IR35 for agencies

As of 6th April 2021, changes were implemented to IR35. 

Firstly, the 2021 reform brings private sector IR35 in line with the public sector, where the reform was implemented in 2017. Secondly, the changes transferred the responsibility of assessing IR35 from contractors to recruiters and large/medium companies. 

Am I now responsible for determining the IR35 status of my employee?

If your agency can answer yes to the following three questions then yes, you are now responsible. If not, it is up to an intermediary, for example your agency fee payer, to do so; 

Is your annual turnover more than 10.2 million pounds?
Is your company’s balance sheet total more than 5.3 million pounds?
Does your company have more than 50 employees? 

As well as determining the IR35 status of an employee, it is also your responsibility to draw up a Status Determination Statement in which you carefully outline your reasons for assessing the employer as inside or outside IR35 – as employee or self-employed. This should be done before the first payment is made. 

HRMC defines IR35 as applying “if a worker provides their services to a client through an intermediary but would be classed as an employee if they were contracted directly”. This applies to contract hours, length and pay. If you’re still unsure, HMRC has a CEST (Check Employment Status for Tax) tool to use to see whether an employee can be classified as self-employed or an employee.