[Update: 17.03.20] IR35 changes have been delayed until April 2021 due to the coronavirus outbreak. All dates and actions asked of Florence users in the below copy are now out of date. No action should be taken by Florence users at this time.
If your care home works with independent contractors, you should be aware of upcoming IR35 legislation.
Here, we’ll explain what IR35 means, how it may affect you, and what questions you should be asking before new rules are put in place in April 2020.
We’ll also talk about how Florence can support you through these changes.
What is IR35?
IR35 is legislation that categorises independent contractors for tax.
Contractors are defined as either ‘inside IR35’ (meaning, paying the same tax and National Insurance as permanent workers), or ‘outside IR35’ - ie, self employed.
What is changing with IR35?
It used to be your contractors’ responsibility to determine their status, and pay taxes accordingly.
Now, it will be the responsibility of private sector clients to determine the status of contractors. Your care home could now be responsible for this from April 2020, depending on a set of factors (explained in the section below).
Will I be affected?
Yes: large and medium-sized care homes
Large and medium-sized private care homes are affected by the change in the rules.
HMRC defines a large or medium-sized private company as meeting two of the following criteria:
- you have an annual turnover of more than £10.2 million
- you have a balance sheet total* of more than £5.1 million
- you have more than 50 employees
*Balance sheet total means the total amounts shown as assets in the company’s balance sheet before deducting any liabilities.
If your home or group meets two of the above criteria, the rule change applies to you.
This means you will be responsible for deciding the IR35 status of the independent contractors you can work with, such as nurses and carers employed to fill shift vacancies.
No: small care homes
If your care home doesn’t meet two of the above criteria, the change in IR35 law will not apply to you.
This means there should be no changes to how you currently operate, it will remain the responsibility of your contractors to determine their IR35 status, and pay taxes accordingly.
When will the new rules be in place?
IR35 rules for the private sector will come in place on April 6th, 2020, at the beginning of the new financial year.
What’s the risk of ignoring the new rules?
You’re liable to pay back taxes if HMRC sees you have not been paying the appropriate tax and National Insurance contributions on workers they deem to be ‘inside IR35’.
It’s important to examine your current setup, and make any adjustments needed to fit with the new law.
How can your care home be ready?
If you’re affected, it’s time to prepare for the changes to the law in April.
What do you need to do to?
You need to review the work your contractors do and assess whether it falls ‘inside IR35’ or ‘outside IR35’.
Then, contractors should be paid according to their status.
- 'Inside IR35' contractors - can be paid via PAYE or limited company, with income tax and National Insurance deductions at source.
- 'Outside IR35' contractors - can be paid via a limited company. Taxes are to be calculated and paid by the worker / their accountant.
How do you define contractors' IR35 status?
This can be complex. Use three principles to help determine contractors' IR35 status:
1. Supervision, direction, and control: Do you have a degree of supervision, direction and control over how your contractor completes their daily work? (Read this government guide for more info on what this means.)
2. Substitution: Is your contractor required to carry out the work themselves, or you can they send someone in their place?
3. Mutuality of obligation: Are you obliged to offer your contractor work, and are they obliged to accept it?
If you can ascertain the three principles don't apply to the contract, then this is an indication it falls outside IR35.
Questions to ask yourself
Ask these questions to gauge areas where you are prepared for IR35, and where you are open to risk.
- Do I know the number of contractors delivering services to my care home?
This helps you know the size of the potential risk, if contractors’ work is not given the correct IR35 status.
- Do I know if contractors are engaged via agencies or directly?
Understanding who you engage with directly and who you source via a third party gives you oversight of the chain of responsibility for supplying payment correctly.
- Do I know which contractors’ roles are different from that of a permanent employee?
This will help you define your contractors’ IR35 status.
- Could my care home cope if we couldn’t hire contractors?
This will help you know the strength of your care home’s reliance on contractors, and the impact of not being able to hire chosen workers due to the change in the law.
- Are staff and agencies ready to take on new responsibilities?
There is an increased administrative burden in setting up contractors to make the appropriate tax and National Insurance contributions via PAYE. You may also need to review your agency’s hiring practises to make sure agencies are accountable for sourcing workers within your required IR35 status.
What does this mean if you work with Florence now?
Getting ready for IR35 is simple, if you’re already working with Florence.
Three steps to complying with IR35:
- Your account manager will get in contact to understand if the new law applies to you, based on HMRC’s criteria.
- You’ll let us know how you would like to pay nurses booked via Florence - either via PAYE, or via their limited company.
- Nurses and carers using Florence will then only be paid via your selected method.
However you opt to pay staff, Florence will have you covered with a pool of nurses and carers ready to work shifts.
How can Florence help you get IR35-ready?
If you’re not already working with Florence, and you’re unsure how to navigate IR35, we can help.
You’ll have 100% certainty you’re in line with IR35 law when working with Florence, as staff will only be paid as you’ve directed - a guarantee your current agencies may not be able to make.
We’re also able to offer greater transparency, speed and simplicity than traditional agencies - see more about how we compare here: Nursing Agencies vs Florence - 5 Differences You Probably Didn’t Know
As well IR35 compliance, Florence offers you quality nurses and carers to help fill your shift vacancies.
Florence nurses are:
- Accountable: Florence’s rating system keeps nurses motivated and professional by rewarding great performance with high ratings, viewable to you when hiring.
- Experienced: Nurses must undergo mandatory training and have at least a years’ experience before joining.
- Safe: Nurses undergo extensive background checks, including enhanced DBS, right-to-work and references from senior managers.
Use Florence to find, engage and pay nurses with one simple website platform, on desktop or your phone. We deliver the best-matched staff for your shifts, without the fuss.
Ask us about IR35...
Fill out the form below to ask us any questions you have about navigating IR35 - or simply arrange a chat about your staffing needs.
The information provided on this web site is of a general nature. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from a professional accountant before you take any action or refrain from action.
Whilst we endeavour to use reasonable efforts to furnish accurate, complete, reliable, error free and up-to-date information, we do not warrant that it is such. We and our associates disclaim all warranties.
The information can only provide an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice.