IR35 - What's It All About?
Put simply, the Intermediaries Legislation (now known as IR35) relates to the tax rules put forward by the Inland Revenue (now ‘Her Majesty’s Revenue & Customs’ “HMRC”) to restrict freelance contractors from gaining tax advantages by claiming to be self-employed when they are not.
The Intermediaries Legislation was introduced on 6th April 2000; it was first proposed by the Chancellor in the 1999 Budget and details were given in the Budget press release which was called IR35.
Following consultation, revised proposals were announced in a new press release dated 23 September 1999, the legislation caused such a stir in that it changed the face of freelance contracting in the UK and it is now commonly referred to as ‘IR35’.
In HMRC’s own words; ‘The aim of the legislation is to eliminate the avoidance of Tax and National Insurance Contributions (NICs) through the use of intermediaries, such as Personal Service Companies or partnerships, in circumstances where an individual worker would otherwise – for tax purposes, be regarded as an employee of the client; and for NICs purposes, be regarded as employed in employed earner’s employment by the client.'
This means that if you are working through a company as a contractor rather than as a direct employee of a client company and you are providing your services directly to that client company, then the IR35 rules have to be considered prior to deciding how you are paid, i.e. as an employee subject to full employed levels of PAYE and National Insurance (“NI”) – if the way you provide your services indicates that you fall within the IR35 rules; or as a self–employed sole trader or a limited company director and shareholder which allows for you to pay beneficial levels of tax and National Insurance.
The rules surrounding IR35 are complex, however, it is very important that they are fully considered, and the appropriate pay method is applied to your earnings, as all self-employed workers and limited company directors are required to submit a tax return to HMRC.
This means that HMRC are fully aware of the working status you are claiming and are able to conduct investigations into your status. If they are not convinced that you are truly in business on your own account, they have the power to make you pay the full amount of underpaid tax and charge additional penalties.
It is imperative that you take your approach to your employment status seriously. Recent case law includes the recent Dragonfly case which considered whether Jon Bessell, the director and owner of Dragonfly Limited, was a disguised employee of his client’s business for certain assignments he worked on and therefore working within IR35. The Judge in the High Court found that he was, which resulted in a £99,000 bill for unpaid tax.
Modern Day Anti-Slavery Policy
The company are committed to promoting and maintaining the highest level of ethical standards in relation to all business activities. Its reputation for maintaining lawful business practices is of paramount importance and this Policy is designed to preserve these values and prevent against Modern Slavery, which encompasses slavery, servitude, human trafficking and forced labour
Purpose & Scope
This statement is made under our legal and regulatory obligations pursuant to section 54(1) of the UK’s Modern Slavery Act 2015 (the Act) and sets out the steps we have and continue to take to ensure that modern slavery or human trafficking is not taking place within our business or supply chain.
The company are proud of the group wide conditions under which employees, temporary workers and contractors are engaged. Given the nature of our business, our Board and Senior Management teams each consider that there is minimal risk (approximating to no risk) that, either within the Group or across our limited supply chains which support our business activities, we are in any way involved in or even tangentially supportive of, or complicit in slavery and human trafficking.
The employment and procurement practices operated by the businesses within the Group ensure that the companies within our Group are rightly viewed as excellent and supportive employers.
To this extent, our Group companies operate as purchasers of goods and/or services, and therefore we expect a high level of ethical conduct from those businesses with which we conduct business.
Anti-Slavery Policy Statement:
The Company has a zero tolerance policy towards any form of slavery and human trafficking and is committed to acting ethically, fairly and with integrity and transparency in all business dealings and relationships, and implementing effective systems and controls to safeguard against any form of slavery or human trafficking from taking place within our organisation or that of our supply chain.
This Anti-Slavery Policy Statement is the principal articulation of the Group’s policy on slavery and human trafficking, and is intended to inform and influence all company operating procedures.
The company operates an accredited ISO Quality Management System, with integrated policies, processes and procedures for all business activities and operations. As part of this system a number of policies are operated to ensure we conduct business in an ethical and transparent manner, including but not limited to:
- Anti-Slavery Policy
- Recruitment Policy
- Compliance Policy
- Whistleblowing Policy
- Safeguarding Adults & Children Policies
- Codes of Practice & Behaviours for Management & Employees
- Anti-Bribery Policy
The Group companies also articulate a series of employee rights and benefits available to employees in the employee handbooks and individual contracts of employment for each member of staff.
Each of the subsidiary operating companies has an Executive Officer or Director who have reviewed and agreed to the terms of this statement. Each of these executives has reporting responsibilities to management and the various boards of companies within the Group. The Group uses the services of Saffery Champness, City Tower, Piccadilly Plaza, Manchester, M1 4BT as the external auditor and Castlerock receives regular update reports from both the external auditors and its own internal auditor and finance function. A combination of these procedures and functions operates to help identify, assess and monitor potential risk areas and mitigate the risk of slavery and human trafficking occurring in our business and supply chains.
In the articulation of this formal Anti-Slavery Policy Statement for the Group we seek to ensure when entering into material contracts that all those in our supply chain and our contractors comply with our stated Anti-Slavery Policy in particular when seeking tenders for service or when auditing our suppliers.
The company operates a supplier policy, an approved supplier engagement process, and from which a limited preferred/approved supplier list is maintained.
All suppliers are subject to due diligence processes prior to being approved as suitable for inclusion on our Preferred Supplier Register. These due diligence processes include, but are not limited to, online vetting checks to ensure each organisation has never been convicted of any offences which relate to or give rise to concerns regarding modern day slavery.
This anti-slavery policy forms part of our contract with all suppliers and they are required to confirm that no part of their business operations contradicts this policy. In addition and as part of our contract with suppliers, authorised signatory confirmation that:
- They have taken steps to eradicate modern slavery within their business;
- They hold their own suppliers to account over modern slavery;
- They pay all employees at least the national minimum wage/national living wage (as appropriate, or London Living Wage for London only) currently in operation;
- We may terminate the contract at any time should any instances of modern slavery come to light.
Due Diligence & Assessing Slavery/Human Trafficking
As part of our initiative and duty of care as an employer, we aim to directly identify actual, or the potential for, human trafficking and/or slavery, using the following and direct methods:
- Assessing the physical appearance of candidates or current employees/staff at interview and/or other arranged meetings/appointments; whilst maintaining an awareness of the signs of psychological abuse (i.e. malnourishment, unkemptness, those that appear withdrawn/fearful or who wear the same clothes daily);
- Record details of persons who attend the office accompanied by others, i.e. those who don’t or are unable to travel alone, appear under the influence of others, fail to interact or appear fearful, those reluctant to discuss current circumstances/arrangements/available working patterns, or who are unfamiliar with the local area/region;
- Record details of persons who do not have, or have difficulty in producing, their own personal identification and/or other documents/records, or have to seek these from other persons;
- Monitor registered addresses of personnel using e-systems to ensure employees/staff who have not declared themselves as family or marital/civil or other partners, are not residing at the same address unless a reasonable justification exists;
- Record details of persons who upon being offered temporary/permanent work positions firstly seek agreement from family/partners/other persons prior to acceptance, or similarly whose family/partners liaise with the company on behalf of the person;
- Operate a policy whereby all employees/staff must arrange and discuss their employment/work/assignments/patterns/availability etc. directly with the company themselves, and not through a third party, unless a suitable justification exists.
Our policy and processes for the prevention of slavery and human trafficking will be communicated to all employees, temporary workers and contractors to ensure a high level of understanding of the risks of modern slavery and human trafficking, and will further form part of the company’s training and supporting materials.
Responsibility & Review
This policy is endorsed and regulated by the Group CEO and has full support of the Statutory and Managing Board of Directors, and Management team. The effectiveness of this policy and strategy shall be monitored on an annual basis or as and when changes to legislation are made to ensure fairness and suitability. The responsibility for ensuring compliance with this policy lies with the company’s Senior Management Team.