UK: IR35 Tax Update – Clarifies End-User Liability When Supply Chain Fails to Pay

The IR35 tax regime will come into effect in April 2021, following a delay due to COVID-19. The legislation mainly affects so-called Personal Service Company (PSC) contractors – limited companies set up to service individual contractors who will be expected to pay tax and national insurance at the same level as full-time employees.

However, there has been some confusion over who is liable to pay the IR35 tax if the PSC goes out of business or otherwise does not pay the tax due. Her Majesty’s Revenue and Customs, the department of the UK government responsible for collecting taxes, has clarified that liabilities extend to MSPs and agencies, as well as clients. For each contract, according to the legislation, end users are expected to issue a status determination statement to show evidence of the relationship between them and the PSC. They are also expected to complete due diligence on the PSC and any intermediaries to minimize liability risk.

Takeaway: Organizations that work with individual service providers under the umbrella of a PSC should remain fully aware of their IR35 liabilities and responsibilities from April 2021 onwards. AGS provides expertise, leadership, and technology to help clients accurately identify and classify workers who may be subject to IR35, and proactively address compliance needs ahead of the new effective date.


Coronavirus Considerations for Businesses

North America

US: Worker Classification Laws Further Defined

US: Federal Regulators Tighten Rules on H1-B Visas

US: Joint Employer Ruling Struck Down for Now

Canada: New Ruling Reinforces Employer Responsibility in Terminations


UK: Migration Committee Advises Review of Shortage Occupations List

Spain: Government Issues New Law on Remote Working


Australia: Underpayment of Workers Prompts Fines

India: New Law Protects the Informal Workforce

Singapore: Government Tightens Requirements for Foreign Workers

This update contains general information only, and AGS is not rendering legal advice. Before making any decision or taking any action that may affect your business, you should consult qualified legal counsel. AGS shall not be responsible for any loss whatsoever sustained by any person or company who relies on this update.