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.

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

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