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IR35: How to manage the payroll for engagements that overlap financial years?


IR35: How to manage the payroll for engagements that overlap financial years?

Just 23 working days to go before the IR35 rules come into force. 

As April 6th gets closer, recruitment agencies are unearthing a number of tasks that will need to be taken care of.  One of the urgent issues to resolve is payments for work undertaken before 6th April – as the burden of determining the IR35 status for payments will fall on intermediaries after April 5, irrespective of when the work was undertaken. 

But what will be the best way to deal with contracts that span the two financial years? For instance, when a contractor is working on a project that starts on March 24 and ends on April 15, the responsibility for determining the IR35 status of the contract will fall on the recruitment agencies for the whole of the contract if the payment is made after April 6th.  In such cases, it is essential to determine the IR35 status of the worker beforehand to avoid any confusion or conflict at a later point. 

You can use the recently released the public beta version of HMRC’s ESS (Employee Status Services) software to get an idea of whether the contract will be inside or outside IR35 now. While HMRC has confirmed that it will stand by the results from the ESS (as long as the information entered is correct), the tool is still in the testing stage and not the final version. 

As HMRC has indicated that it may probe the past history of contractors that fall within IR35 – even for engagements undertaken prior to April, for long-term contracts spanning weeks or months, this rule may open a can of worms.  So, it is essential to exercise caution while dealing with such cases. 

Just 23 working days remain…
With just 23 working days remaining, it is imperative for recruitment agencies to have a plan in place for dealing with the changes forced by the IR35 legislation. Our IR35 experts can help. 

Pom Chakravarti: Call 07870 678 557 or email pom.chakravarti@qxltd.com.  

Kunal Shah: Call 0758 4651087 or email kunal.shah@qxltd.com.

Other important IR35 related questions recruitment agencies must ask:

  1. How will the Apprenticeship Levy impact your recruitment agency? 
  2. Are your clients and contractors aware of all the changes that are happening? 
  3. How many public sector agency workers will be lost as a result of falling within IR35?
  4. Will contractors ask for higher pay rates to offset the Employer’s NI?
  5. Do you have a plan in place for paying the invoices for work done before April 6?

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