Everything you need to know about IR35

27 July, 2023

Update: On the 17th the government reversed its decision to repeal the IR35 reforms. Therefore will no longer be any changes to IR35 from April 2023. Businesses will revert back to the IR35 rules that were in place from 2001 until 2017 in the public sector and 2021 in the private sector.

September 2022

Chancellor Kwasi Kwarteng announced the repeal of the 2017 and 2021 changes to IR35. This shift now places the responsibility for determining IR35 status and tax obligations back onto the contractor, relieving the end client of this duty.

When will the changes to IR35 take place?

The IR35 adjustments unveiled during the September Mini-Budget will become effective in April 2023. The existing regulations outlined in Chapter 10 will continue to be applicable until April 5th, 2023. Any tasks performed before this date, regardless of invoicing and payment timing after April 6th, 2023, will be subject to the determination of the client regarding their status.

Why did the UK government repeal the IR35 reforms?

Liz Truss indicated her intention to assess IR35, , emphasising the importance of distinguishing between independent contractors and large businesses within the tax system. This move was part of allowing contractors and businesses to focus on growth, a flexible economy and new investment without the constraints of the IR35 reforms.

Is IR35 still relevant in 2023?

 After the changes go live in April 2023, IR35 will still very much be applicable. The core principles of IR35 remain unchanged; what has undergone alteration is the process of establishing employment status, which now shifts from clients back to the contractor or their limited company.

IR35

As of April 2022, HMRC will be enforcing its policy change from 2021 – meaning heavier punishments for companies found to be operating inside IR35.

This guide will help you to be more informed on the basics of IR35 so you can understand whether the off-payroll working rules apply to you and more importantly, determine the actions you need to take.

Whether you’re self-employed or work at a company that engages self-employed subcontractors, you’ll have heard about IR35.

As is the case with many tax-related issues, there is a lot of confusion and fear around this legislation, so our in-house employment status experts have come together to produce this handy guide to help you get to grips with IR35, work out whether it affects you directly and offer a solution to all your compliance needs.

What is IR35?

IR35 is anti-tax avoidance legislation that aims to collect additional payment from employees “disguised” as contractors for tax avoidance purposes.

What does inside IR35 mean?

When you’re assessed to be inside IR35, this means that you are a disguised employee and should pay broadly the same tax as a regular PAYE employee. 

What does outside IR35 mean?

If you’re outside IR35, then you are self-employed and can be paid through a limited company, with the tax advantages that come with it.

Why does IR35 exist?

Before IR35, employees of companies were being disguised as sub-contractors to lower avoid paying taxes such as (are there any others).

IR35 is designed to prevent tax evasion via a limited company structure & ensure that businesses and individuals pay the correct HMRC tax contributions.

Who does IR35 apply to?

IR35 rules apply to workers who are providing their services through their own limited company, otherwise known as a Personal Service Company (PSC) or an intermediary such as: 

  • Workers providing their services through an intermediary
  • Clients who receive worker services through an intermediary
  • Agencies providing worker services through an intermediary

This does not apply to:

  • Self-employed contractors providing services to clients
  • Clients receiving services through self-employed contractors
  • Clients located outside the UK or with no UK presence

Who is responsible for determining status?

As of April 2021, the rules around how IR35 status is determined changed. Now, medium to large-sized private sector clients, along with all public sector authorities, will be held responsible for deciding if the IR35 rules apply to their workers.

In the case of a worker providing services to small businesses in the private sector, the worker’s intermediary will be held responsible for deciding their employment status.

How old is IR35?

These IR35 rules and accompanying legislation were first brought in way back in the 1980’s, but have only recently started to affect the logistics industry as the rules have evolved in recent years.

Is my company small medium or large?

HMRC has set out three criteria to define medium to large-sized private business and it is important to note that if your business meets ANY TWO OF THE THREE criteria, then IR35 regulations apply to your company. These criteria are, you have: 

  • More than 50 employees
  • Have a balance sheet of over £5.1 million 
  • Have an annual turnover of over £10.2 million

What is a disguised employee?

Disguised employees are workers who receive payments from a client via an intermediary, (for example, their own limited company) and whose relationship with their client is such that had they been paid directly they would be employees of the client. 

Let’s say for example that you work for a company as an employee. The next day you announce to the company that you are leaving, you want to become your own boss, but you are happy to continue working for them under the exact same conditions – essentially all that has changed is the way that you earn and the way they pay you – this is disguised employment. 

There are 3 main tests that are used to determine status and expose disguised employees.

How is status determined?

There are 3 main tests HMRC use to determine whether someone should be classed as self-employed and therefore falls inside or outside of IR35.

Supervision, direction and control: 

This test relates to how much control the work provider has over how the work is completed. If, for example, an individual is required to work at certain times, this would usually imply that they are working under a contract of service.

Right to Substitute: 

This test considers whether or not the individual could bring someone else in to complete the contract, or if they must complete the work themselves. If the contract requires the individual to undertake the work personally, using his or her own skill in the performance of a service, this will often indicate employment.

Mutuality of Obligations

If you are obliged to accept further work offered by a company (or vice versa), then this will not reflect well in terms of self-employment.

There are other indicators that can be used to determine worker status which look at benefits. 

Things such as sick pay, holiday pay and other work perks which are traditionally enjoyed by employees need to be considered. If you are receiving any of these from a company then HMRC will consider you within IR35 as you’re receiving employee benefits. 

Why does IR35 exist?

Before IR35, employees of companies were being disguised as sub-contractors to lower avoid paying taxes such as (are there any others).

IR35 is designed to prevent tax evasion via a limited company structure & ensure that businesses and individuals pay the correct HMRC tax contributions.

Other blogs you might find interesting.

Onboarding process for new job roles

1 March, 2024

What is onboarding?

26 February, 2024

The consequences of your business not being compliant

23 February, 2024

Legal vs compliance. What’s the difference?

19 February, 2024

How to onboard remote employees

16 February, 2024

5 compliance mistakes you may not know you’re business is making

13 February, 2024

Contracts: Five mistakes to avoid

9 February, 2024
Retain Drivers Feature

Want to offer workforce perks? Here are 5 great ideas

5 February, 2024

Employee Spotlight – Tom

5 February, 2024

3 must have policies your private hire business needs

29 January, 2024

How to get onboarding right

29 January, 2024

What does onboarding involve?

26 January, 2024

Why is onboarding important?

22 January, 2024

How onboarding works

19 January, 2024

What is employee onboarding?

15 January, 2024

Tech ensuring compliance in private hire services.

11 January, 2024

A guide to onboarding with the Wise last-mile delivery platform

11 January, 2024

Reflecting on a Remarkable 2023: Wise’s Year in Review

11 December, 2023

Stay on Top of Important Dates with Expiry Reminder Software

8 December, 2023

Wise awarded ‘Most Innovative Company of the Year’

7 December, 2023

Employee Spotlight – Chloe

4 December, 2023

Wise Charity Bake Off for Pancreatic Cancer UK

4 December, 2023

Preparing for 2023 peak deliveries

1 December, 2023

The best document expiry software

30 November, 2023
wise benefits

4 ways to retain drivers when you can’t increase their pay

27 November, 2023

Driver onboarding checklist for peak

24 November, 2023

What contracts do I need to onboard delivery drivers?

20 November, 2023

The best ways to retain delivery drivers in 2023

17 November, 2023

Employee Spotlight – Evie

16 November, 2023

How to stop drivers dropping off in the onboarding process

13 November, 2023
Contract For Services Review

4 most important documents to onboard delivery drivers

6 November, 2023

How to effectively manage peak period as a parcel delivery service

3 November, 2023

Navigating the costing pressure in the last-mile industry

23 October, 2023
dan sitting with a colleague

Wise attends Amazon Ignite 2023

16 October, 2023

What is an onboarding process?

13 October, 2023

What does it mean to be FCA Regulated?

13 October, 2023
great place to work

Wise achieves Best Place To Work third year in a row

12 October, 2023
App User

Payment software for courier businesses

6 October, 2023
Expiring & Re-uploading Evidences

How to simplify and save time on payroll

4 October, 2023

Improve Driver Retention: How to Boost Take-Home Pay

21 September, 2023
Set Job Roles and Employment Journeys

How the Wise app works: Wise Invoicing

18 September, 2023

The impact of 24/7 Mental Health Support

31 August, 2023

4 benefits of document management software in logistics

31 August, 2023

Why is compliance important in the last-mile sector?

29 August, 2023

Streamline your driver onboarding process with onboarding

25 August, 2023

Preparing new delivery drivers for the Christmas Rush

22 August, 2023

Employee Spotlight – Gavin

22 August, 2023

Preparing for Peak with Effective Driver Onboarding

18 August, 2023

Employee Spotlight – Adina Bogdan

18 August, 2023

Even More Benefits Of Being A Self-Employed Courier

11 August, 2023

Recapping Wise’s Unforgettable 2023 Client Events Calendar

11 August, 2023

How the Wise app is improving self-employed driver wellbeing

11 August, 2023

5 top job boards to recruit courier drivers in 2023

11 August, 2023

The impact of Digital GP services for self-employed drivers

11 August, 2023

How to attract new clients to your delivery business

11 August, 2023

How Wise’s driver perks package can reduce turnover rates

11 August, 2023

Best practices for recruiting and retaining new drivers

11 August, 2023

3 steps to a perfect driver onboarding process in 2023

11 August, 2023

Why is a good driver onboarding process important?

11 August, 2023

Elevating Last-Mile Logistics with Customisable Evidence Collection

11 August, 2023

Submitting your UTR number

27 July, 2023

Epic Clash: Clients vs Employees Football Match

3 July, 2023

4 Key Trends in the delivery industry so far in 2023

26 June, 2023

What is onboarding in recruitment?

22 June, 2023

What are the perks of being a self-employed driver?

21 June, 2023

Driver onboarding: top tips for a quick start

14 June, 2023

How to access mental health support through the Wise App

1 June, 2023

What are the perks of being a self-employed driver?

26 May, 2023

Four ways to optimise delivery operations

24 May, 2023

5 self-employed driver recruitment and retention strategies to boost fleet performance

22 May, 2023

Mental Health Awareness Week 2023

15 May, 2023

Updates from Wise

12 May, 2023

Reduce driver drop-off with an industry-leading onboarding platform

11 May, 2023

Three tips to speed up your self-employed driver onboarding

10 May, 2023

How Wise is helping to transform couriers’ self-employment experience

8 May, 2023

 Six things you need to know about an SLA

5 May, 2023
SLA auto re-sign

Experience easy self-onboarding with the Wise App

5 April, 2023

Stay on the road with 24/7 roadside assistance.

4 April, 2023

How to access Digital GP through the Wise App

3 April, 2023

Unlock exclusive savings with the Wise App

1 April, 2023

HMRC nudges self-employed workers for undeclared tax

23 February, 2023

Employee spotlight – Becky

8 February, 2023

How to onboard a new employee

5 February, 2023

Employee Spotlight – Anthony Tabone

15 December, 2022

Why should you streamline your workforce management?

13 December, 2022

How important is to have a written agreement

8 December, 2022

How businesses are getting ready for peak

18 November, 2022

Amazon Ignite Connect Expo

19 October, 2022

Birmingham Tech Week 2022

17 October, 2022

Strengthen your compliance

10 October, 2022

IFLY with Wise

7 October, 2022

We’re a Best UK Tech Workplace

28 September, 2022

Employee Spotlight – Joana

14 September, 2022

How to boost your recruitment and retention rates

6 September, 2022

Onboard new self-employed drivers in just 10 minutes

19 August, 2022

One year in our HQ!

15 August, 2022

Attract new users with Wise

12 August, 2022

The Wise Journey

11 August, 2022

Wise Client Golf day at the Belfry Hotel & Resort

9 August, 2022

Why is the onboarding process so important?

3 August, 2022

Self-employed health: Is it something you’re neglecting?

1 August, 2022

Talk to Us Month 2022

25 July, 2022

The cost of living crisis – How Wise helps the self-employed

6 July, 2022

The Wise App launches exciting savings perk

1 July, 2022

Employee Spotlight – Brad Davies

1 June, 2022

How Wise is helping to transform business owners’ self-employment experience

18 May, 2022

Who are Securitax?

6 May, 2022

The importance of compliance

5 May, 2022

What does HM Revenue and Customs (HMRC) mean to the self-employment industry?

5 May, 2022

Supervision, direction and control (SDC) – explained.

21 April, 2022

Mutuality of Obligation – explained

20 April, 2022

The right to substitute – explained

19 April, 2022

How to set up your own limited company

14 April, 2022

What is the difference between a sole trader and a limited company?

5 April, 2022

Why be self-employed? The benefits

22 March, 2022

12 things you need to know about Unique Taxpayer Reference Numbers

16 March, 2022

How businesses are using the Wise onboarding system to save time and money 

11 March, 2022

Supporting the Princes’ Trust Future Steps Challenge

28 February, 2022

Five ways to ensure you have a happy and healthy workforce

23 February, 2022

Why is there a high turnover rate for self-employed drivers

16 February, 2022

The nation’s view on self-employment

14 January, 2022

How to become a self-employed courier driver

5 January, 2022

Checking in on Solihull Moors Football Club

3 January, 2022

How to use the Wise App 

10 December, 2021

The Big Wise 2021 Review

3 December, 2021

Wise scoops West Midlands Tech Award

17 November, 2021

Wise recognised with Armed Forces Covenant Award

10 November, 2021

Pathways charity announcement

19 October, 2021

The Great Wise Bake Off

14 October, 2021

A sneak peek into the brand new Wise office

29 September, 2021

Wise recognised as Great Place To Work ™

22 September, 2021

The numbers behind the logistics industry

23 July, 2021

Kicking off an exciting new partnership

1 July, 2021

Wise goes up a gear with FHO racing BMW motorrad sponsorship

14 June, 2021

Addressing workforce issues in the logistics industry

11 June, 2021

The big Wise glossary of terms

9 June, 2021

Wise – new system & mobile app launch

7 June, 2021

Interested in the Wise software?

 Fill out the form to speak with a member of our sales team.