up until 5th April 2021 it is still the PSC who is responsible for determining the IR35 status of engagements so for the moment it’s business as usual. Beyond this date many contractors will continue to operate their personal service companies
. There are many different reasons why this might be the case but the most common reasons are:
1.) They will be providing services to clients who are exempt
from the new rules such as overseas companies and small UK companies. – In this case the PSC will determine the status of the contract. If it determines that the contract is outside of IR35 the company can operate in the usual way or if the contract falls within IR35 then it can continue to calculate and pay income tax and NI as in the example above.
2.) They are working multiple contracts – Remember each individual assignment or contract will be subjected to these new rules which means you may have some engagements that fall inside IR35 and some outside.
The contracts that fall outside of IR35 can be handled more tax efficiently through the limited company.
3.) They want to maintain the flexibility
that their limited company offers them, especially when working shorter term contracts – If their current contract falls inside IR35 but their next contract falls outside of IR35 they can easily pickup where they left off without the need to form a new company.