Business Briefing: IR35

Business Briefing: IR35 – Sarah-Jane Butler, Solicitor, Farringford Legal

 Session on IR35 and legal implications for our members, helping businesses navigate the joys of working within its parameters!

Sarah-Jane prepared a detailed breakdown of IR35 and its implications for small businesses, including practical considerations for engaging consultants versus employees.

1. IR35 Overview
   • IR35 is legislation aimed at ensuring individuals working through intermediaries pay the same taxes as regular employees.
   • Introduced to tackle disguised employment, it affects small businesses that hire contractors.
   • The Employment Rights Act mirrors IR35, meaning compliance is not just a tax issue but also an employment law issue.
2. Small Business Exemption
   • Small businesses may be exempt from some IR35 responsibilities, but must still assess contractor relationships.
   • The exemption applies if the business has 50 employees or fewer, an annual turnover of £10.2 million or less, or a balance sheet of £5.1 million or less.
   • Even if exempt from IR35, businesses must comply with the Employment Rights Act.
3. Contractor vs Employee Relationships
   • Key factors to determine the nature of the relationship include control, substitution, and mutuality of obligation.
   • Contractors should have flexibility and be paid based on deliverables rather than fixed monthly payments to avoid being classified as employees.
   • Contracts must reflect actual working practices to avoid misclassification.
4. Compliance and Risk Management
   • Businesses should regularly review contractor agreements to ensure compliance with current legislation.
   • Using the CESS tool can help assess contractor status and provide evidence in case of disputes.
   • If a contractor is determined to be an employee, businesses may need to negotiate terms and consider potential backdated claims for employment benefits.
5. Farringford League Services
   • Farringford League offers legal support in finance, corporate, commercial, IP, trademark, patents, employment, HR, tax, data protection, and AI.
   • They provide a flexible ‘Bank of Hours’ payment model, allowing businesses to pay for only the services they use.
   • The team consists of experienced professionals who can assist small businesses with legal compliance and contractor management.