Over the last twelve months Sonovate has been working with a number of experts to ensure we create solutions that support how you work.
Fee payer status
Since IR35 was postponed last year, HMRC have released more guidance to confirm everyone’s position in the IR35 chain.
The new off payroll rules affect everyone in the labour supply chain, starting with the contractor’s PSC and ending with the client end user.
“Contractual chain – The chain of persons contracting with one another which the chain payment flows through. It starts with the person in receipt of the worker’s services (the client) and ends with the worker’s intermediary. Also known as the labour supply chain.”
As the contract between you and your client is a contract to supply a contractor, you are in the labour supply chain. The same with your contract with the contractor’s PSC, it’s the PSC’s obligation to supply the contractor to you. Sonovate are not in this chain – we’re a supplier of invoice financing and we carry out some tasks on your behalf.See more on HMRC guidance
What this means for you
As your business is the person who pays the PSC in the labour supply chain, you are the person that HMRC considers to be the deemed employer if the contract is inside IR35.
This means that you are responsible for deducting and paying income tax, employee and employers NI to HMRC. Additionally, as the fee payer, you will be liable for any unpaid tax as a result of an incorrect status determination.
This obligation is triggered when you receive the Status Determination Statement (SDS) from your end client. If you don’t receive an SDS, then, according to HMRC rules, you cannot be the deemed employer.
What we recommend you do
Speak to your clients and understand how they’ll be releasing SDS’ to you, so that you’re ready to instruct Sonovate to make any changes to your payment instructions.
Remember, it is the client’s legal obligation to carry out an SDS carefully. Unless you can see an obvious reason (like the facts on the SDS are clearly wrong and don’t match what you’ve agreed for the placement), your role in HMRCs eyes is to follow the status and mechanically make sure the deductions and payments are compliant.
Clients have a high level of care that they need to take when assessing a placement under the new rules.
If you genuinely believe the SDS is wrong, you can challenge this with your client.
How Sonovate is supporting you
Sonovate’s IR35 solution covers the full range of inside and outside placements, including PAYE, Umbrella, PSC/Ltd and Statement of Work.
By using Sonovate you can rest assured that the mechanics of the new off payroll rules, and your instructions to us, are fully covered.
Key things to note and explore:
Pay and charge
- For outside IR35 placements, nothing changes.
- For inside IR35, you might want to review pay and charge rates to offset incurred cost as you’re the employer for tax purposes.
- If you are considering PAYE placements for your inside IR35 contractors, please check out our PAYE calculator which will provide a guide (for illustrative purposes) to help you understand and set rates for your clients.
- Sonovate is developing a PSC/Ltd deduction calculator to release before April.
Adding a placement
- Your client tells you the status of a placement – you add into the portal as per instruction.
- Sonovate is updating the portal and will release product guides throughout March.
Making inside IR35 payments (PAYE, PSC/Ltd deductions, Umbrella)
If you are the deemed employer you are responsible for paying statutory deductions to HMRC. Sonovate has three options available to you:
- Sonovate can send you gross payments for you to manage the deductions and payments to candidates and HMRC.
- Sonovate can calculate the deductions, pay the candidates net and send to you the deductions for you to pay to HMRC.
- Sonovate can pay gross to Umbrella who make deductions and pay candidates. For more guidance please contact your Umbrella.
If you would to speak to Sonovate about PAYE or PSC/Ltd deductions, please email firstname.lastname@example.org
- If your business receives a SDS, you take on the responsibility of being the fee payer.
- Speak to your clients and get a sense of what determination they will put in place. Remember, whether a contractor is inside or outside IR35 is down to the ground working practices, there’s no contract terms that definitively determine this.
- Sonovate’s IR35 solution covers the full range of inside and outside placements, including PAYE, Umbrella, PSC/Ltd and Statement of Work.
- Consider evaluating your pay and charge rates for inside placements.
- If you are the deemed employer you are responsible for paying statutory deductions to HMRC. Contact Sonovate to discuss your options.
Throughout March we will be releasing information on each of our solutions to you.
If you would like more information on any of our products, please get in touch on 0207 112 4959 or email email@example.com