IR35 Reforms are Here
Find Out How Allegis Group Can Help
Contractors and consultants are no longer responsible for determining whether they are inside or outside IR35 for tax purposes. In April 2021, changes to the legislation in the private sector moved the responsibility for making the determination to the end-client. Our team of expert IR35 specialists have put this IR35 hub together to help you navigate the legislative reforms.
What is IR35?
IR35 is a piece of tax legislation which looks to determine a genuine business from what is called a ‘disguised employee’. It targets personal service companies (PSCs) – limited company contractors – who may be working more akin to an employee of their end-client rather than providing a genuine contractor service. The legislation seeks to reclaim any additional income tax and National Insurance Contributions (NICs) that they may have paid had the contractor been engaged as an employee. In April 2017, public sector reforms meant that the responsibility for determining the IR35 status of the worker shifted from the contractor to the end-client and the ‘fee-payer’ became liable for unpaid taxes and NICs. These reforms were applied to the private sector in April 2021.
Find out more about what these reforms will mean for you.
HOW DOES IR35 REFORMS IMPACT OUR CONTRACTORS AND CONSULTANTS?
Am I Likely to be ‘Inside’ or ‘Outside’ IR35?
To be considered ‘inside IR35’ means that for tax purposes the contractor or consultant is treated as an employee of the end-client and therefore subject to PAYE (pay-as-you-earn).
To be considered ‘outside IR35’ means that for tax purposes the contractor or consultant is operating a legitimate business outside of IR35 rules.
There are a number of factors that need to be considered together in order to determine whether a role falls outside IR35 and is compliant with off-payroll working reforms. These are:
If the end-client is able to answer ‘yes’ to most, if not all, of the above questions (some of which will have higher weighting than others), it is likely that the role falls outside IR35.
Get in touch with our team of IR35 specialists.
If I am Inside IR35 – What is PAYE?
If the assignment is deemed to be inside IR35, then you will need be paid under a PAYE engagement method. The appropriate income tax and NICs will be deducted from your gross pay by the fee-payer who will be responsible for submitting it to HM Revenue and Customs (HMRC) instead of relying on you to typically make a lump sum payment at the end of each tax year. This is known as Pay As You Earn – or PAYE.
Allegis Group PAYE Offerings
Allegis Group payrolls 200,000 PAYE contractors and consultants a week. This means we have considerable experience to draw from and we’re able to offer you the best possible PAYE solution compared with working via an umbrella company.
As an Allegis Group payroll temporary worker, the Agency Worker Regulations 2010 are likely to apply to your assignment. This means you will benefit from certain entitlements that a permanent employee of the end-client receives, such as:
- Pay parity
- Paid annual leave
- Pension contribution
- Statutory sick pay*
- Statutory maternity, paternity and adoption leave*
*Subject to you meeting the relevant statutory criteria
When engaging via Allegis Group PAYE you become an Allegis Group PAYE contractor or consultant. This means that we will pay you your net salary on a weekly or monthly basis after deducting all necessary PAYE and NICs in line with HMRC requirements.
Take a look at our offerings and how they compare with those from a typical umbrella company:
| Offering | Allegis Group PAYE | Umbrella Company |
| Free payrolling service |  |
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| Pension scheme | |
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| Salary sacrifice pension contribution | |
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| Direct access to new assignments | |
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| Insurance | |
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| Free certified training | |
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| Reduced administrative burden | |
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| Retail savings and discounts | |
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| Specialised contractor platform | |
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| Compliance | |
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Get in touch with our team of IR35 specialists.
Our PAYE Myth Buster
Chances are you will have heard several myths that might make you think twice about choosing Allegis Group PAYE over going with an umbrella company. We’ve created this myth buster to help you separate fact from fiction.
If you are operating through a limited company, there are instances in which you may be able to enjoy tax relief on the cost of travel and subsistence. In line with IR35, HMRC has changed the rules to dictate that for you to enjoy tax relief on allowable expenses, your contract must pass the supervision, direction and control (SDC) test. In order to determine this, the umbrella company may ask you to complete an assessment. If you are inside IR35, or operating under a PAYE mechanism, HMRC will automatically classify every umbrella contractor under SDC unless you can provide evidence otherwise.
All companies are required to enrol eligible workers into a workplace pension and contribute towards it. A vast majority of umbrella companies will offer a workplace pension through NEST, a Government-backed defined benefit pension scheme.
In addition to the workplace pension, some umbrella companies offer a service whereby pension contributions can be made into a pre-existing personal pension via a salary sacrifice scheme typically for an additional weekly fee. If the umbrella company does not work with your personal pension provider then it may not be a guaranteed offering.
PAYE with Allegis Group means that you are eligible for a workplace pension through Aviva and you are also able to request pre-tax salary sacrifice payments into your personal pension if you are with one of these providers: Scottish Widows, Hargreaves Lansdown or Legal & General.
You could potentially be up to £1,250 per annum better off with Allegis Group PAYE. On average umbrella companies charge a fee of £20-25 per week for running a contractor's payroll -- that's a cost of £1,000-1,250 per annum, whereas Allegis Group's payroll service is completely free!
Allegis Group deducts tax and NICs at source in line with HMRC requirements and the correct payment practices, which in turn means that there should be no difference in PAYE calculations versus an umbrella company operating a compliant tax regime.
At Allegis Group, we have based our calculations on the HMRC guidelines outlined below, but we do understand that this is not always consistent with our estimates provided in the market.
- If you are under 65 and earn less than £100,000 a year, your tax code will likely be 1257L and you will be eligible for the basic tax-free Personal Allowance of £12,750.
- The guidelines state you’ll be taxed £1 of your Personal Allowance for every £2 you earn over £100,000. It is important to note that if your income has reached £125,000, your whole income will be subject to the higher rate of Income Tax meaning there is no basic tax-free allowance.
Many umbrella companies advertise ‘continuous employment’ where you will stay employed with the umbrella company contractually, however, you won’t be paid unless you are engaged on an active assignment with a client. It is important to note that the umbrella company cannot help you find your next assignment as they do not offer recruitment services. At Allegis Group a strategic imperative for us is to prioritise repeat assignments and projects for our current workforce!
Contact us to find out why you should work with us instead of an umbrella company.
I am Outside IR35 – What Happens Next?
If the assignment is deemed to be ‘outside’ IR35, this means that you are able to operate as a genuine business. You will have the responsibility of ensuring that you are paying the right amount of income tax and National Insurance from the payment made for your services. You are not subject to PAYE deductions by the contracted fee-payer. We will require a copy of the Status Determination Statement from either yourself or the end-client for the assignment.
Your representative can support you to get you swiftly started on your assignment or project as a limited company contractor or consultant.
Calculate Your Take-Home Pay
Results
If you’ve been provided a calculation by an umbrella company which appears to be a better result, please contact us to discuss. It might be the case that the umbrella company has applied different assumptions to the ones described below.
NB: The calculations provided in this estimate are in line with current HMRC guidelines. The Contractor Estimated Take-Home Pay is not a guaranteed take-home amount - it is for illustrative purposes only and as such, does not take into consideration your personal circumstances. Please speak to your accountant or an IR35 specialist for independent tax advice and calculations tailored to you personally.
These calculations are based on the following assumptions:
- We have not included earnings from any other sources this tax year.
- Pension Contribution has not been accounted for.
- Calculations are based on working 52 weeks in a year and we have applied weekly tax allowances.
- This is based on rest of the UK tax allowances and uses 2022/2023 tax rates. Tax rates and take-home pay may change post April 2023 when HMRC announces amended tax rates for the new tax year.
- Holiday pay is paid using a calculation of daily earnings from a 52 week average when using the accrued holiday pay method.
- If your income is over £100,000, your personal allowance of £12,570 may be reduced in line with HMRC guidelines which is reflected in the above calculations.
HOW WILL THE REFORMS IMPACT THE END-CLIENT?
What Does it Mean for You and Your Business?
- A substantial increase in numbers of contractors and consultants previously operating under a Personal Service Company (PSC) have switched to PAYE contractors and consultants.
- An increase in the demand for permanent staff by end-clients which is costly and results in extra employment-related liabilities.
- More end-clients are opting for outcome-based services where IR35 determination and service delivery risk are taken on by a third-party service provider, not the end-client.
- Some contractors and consultants wish to retain their PSC regardless of whether their contract is considered to be inside IR35 or not.
Under the rules of the legislation there is an obligation on the end-client to ensure it has communicated the result of the determination (the SDS) to the contractor or consultant and the next party in the supply chain (normally the agency or service provider) to ensure that the relevant parties are aware of the result and so the correct tax treatment can be applied.
Failure to pass this information on could result in the end-client becoming liable for any taxes owed to HMRC arising from the assignment (this is referred to as the “provision of debt transfer” within the legislation). The financial implications of providing the IR35 determination without reasonable care, or of not passing the determination result to the relevant parties, are potentially significant. HMRC has the ability to require payment of back-taxes owed over a number of years in addition to any penalties and interest amounts accruing in the event that HMRC believes a determination has been arrived at incorrectly.
How We Can Help
Managed and Outsourced Services
We also offer a spectrum of outsourced services utilising specialist in-house delivery managers, as well as internal and external subject matter expertise to ensure fast and effective delivery. We use best practices, methodologies and tools to execute on the successful delivery of client outcomes. Services range from Project Led Managed Services to full outsourcing with an ownership of risk and project outcomes, including offshore solutions.TEKsystems
We provide IT capacity management services and IT professional services through our Global Services division. Our Global Services division is comprised of global solution centres, regional and national delivery managers, regional solution executives and national account directors focused on providing IT capacity management and professional services to our clients. Our service catalogue includes managed service projects and outsourced and advisory services across technology towers that cover Applications, Infrastructure, DevOps, Enterprise Technologies, Service Support and Technology Deployment. It’s supported by our global network of delivery centres and subject matter experts.
Aston Carter
Aston Carter Consulting has extensive experience operating and consulting on risk and regulation, compliance, and change and transformation programmes. We provide project based and outsourced services through tailored solutions and rapidly mobilised, high-performing teams. Aston Carter Consulting is a unique alternative to traditional Tier 1 consultancy services, we provide our clients the opportunity to engage expert consultants in a flexible and agile way.
Temporary Staffing
Are you looking for an experienced partner in your supply chain with IR35 expertise? Our Allegis Group PAYE engagement model is an ideal solution for our clients because it presents the least risk for end-clients and all other parties in the chain.
We payroll 200,000 PAYE contractors and consultants on a weekly basis and therefore we already have the infrastructure in place to support payrolling significant numbers. We are able to help a large volume of PAYE contractors.
Permanent Staffing
Our existing permanent staffing teams have a significant presence in both financial services and commerce and industry markets partnering with a range of clients across the UK to support their resource requirements including resource augmentation services. We are experienced in dealing with large volume recruitment campaigns, niche one-off hires and retained search.Find out more about how we can help you business.
The Benefits of Engaging Allegis Group PAYE Contractors and Consultants
Reduced supply chain
Our direct PAYE offering via Allegis Group means fewer parties in the contractual chain enabling better control of the supply-chain and associated risks for clients.
Reduced risk
Over the years, we have seen that our clients want to work with reputable agencies and want to distance themselves from payroll companies who historically have not always been 100% compliant with regulations. By operating our payroll in-house this means the risk of inappropriate payment practises is significantly reduced.
Enhanced contractor and consultant experience
By maintaining direct contact with our contractors and consultants, we are able to offer a superior contractor and consultant experience. Additionally, our extensive PAYE offerings include access to retail discounts, a certified learning platform, a specialised platform and dedicated points of contact.