How Hiring Professionals Will Help Your Business with IR35

If you are the owner of a medium or large business, you’re most likely familiar with the relatively new tax rule IR35 that was implemented in April 2020. Small business owners fortunately don’t have to worry about this tax regulation, but larger businesses do. Due to the confusing nature of this newly implemented ruling, many businesses are considering hiring professionals.

Hiring professionals can reduce the chance and likelihood of facing hefty fines and being accused of tax avoidance. It also can help create a sense of peace of mind and relief in an otherwise stressful time period – tax season. Should you have decided to hire someone, we will explain what you can expect for those financial professionals to do for you, and what process they will go through in order to determine whether or not a contractor is an employee or not.

The Process

One document needed in the process of IR35 is the status determination statement. This document explains what decision has been made regarding the official employment status (whether they will be paid as a Limited Company or as an employee) with the reasons behind that decision. This is important for all individuals involved to have on hand not only for tax purposes but to provide transparency and clarity on expectations.

Many companies now offer their own versions of a determination of status check. One of these was created by the HMRC themselves, called the Check Employment Status for Tax or CEST for short. It’s crucial that should you decide to use it to download a copy, as it is considered a way to hold HMRC liable for the decision being accepted.

What Questions to Expect on these Tools

When filling out one of these tools in order to determine the status of a contractor, a series of questions will be asked guiding you through the process. Depending on these answers, your contractor may be considered an employee or a Limited Company. Here are some of the questions that will help determine whether or not a contractor is considered self-employed or not:

  • Will this individual be an office holder?

If the answer is yes, then this person is immediately classified as an employee.

In order to be considered as someone who doesn’t follow the requirements as an employee, but falls under the self-employed category, the following questions would be asked:

  • Does the client have the right to reject a substitute?
  • Would you have to pay your substitute?
  • Does the client have the right to move you from the task you originally agreed to do?
  • Does the client have the right to decide how your work is done?
  • Does the client have the right to decide your working hours?

And more questions follow. If these questions are answered no, then the individual is considered a Limited Company. The questions mainly ask if the client is in charge of the working conditions and service performed, or if the contractor themselves is the one responsible for those aspects.

FD Capital

If you have read this and decided you’d much rather have a professional company deal with this tax information and regulations, you can rest assured that by hiring FD Capital you and your taxes are in safe hands. FD Capital will go through the determination documents for you and help classify individuals in order to avoid any kind of fines or penalties.

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