Freelancers operating via a Personal Service Company (PSC) that start a contract from 6th April 2021 will be subject to the UK’s updated IR35 rules. The new rules mean big clients must now carry out an IR35 assessment and tell YJ the result. If a big client assesses an assignment as Inside IR35, the law says tax must be paid directly to HMRC. If this isn’t done correctly, there can be serious tax consequences (including interest, fines and penalties). YunoJuno has partnered with Giant Business Connect to administer all Inside IR35 assignments.
The IR35 rules only apply to PSC freelancers - so not Sole Trader or Umbrella freelancers on the YunoJuno platform. Also, the new rules don’t apply to small clients.
Big clients must do an assessment of the working practices for every contract with a PSC freelancer. The result will be either Inside IR35 or Outside IR35. The big client passes the result (and the reasons for it) to YunoJuno and the PSC freelancer in a document called a Status Determination Statement (SDS). PSC freelancers will not get an SDS from a small client - the old rules apply and the PSC freelancer is still responsible for making a self-assessment and telling HMRC about any Inside earnings in their tax return.
What will happen for an Outside IR35 status?
On the YunoJuno platform the big client will provide the SDS, but other than that, nothing will change. PSC freelancers will contract with YunoJuno and YunoJuno will pay their PSC gross (plus VAT, if registered). Giant Business Connect isn’t involved in this.
What will happen for an Inside IR35 status?
On the YunoJuno platform the big client will provide the SDS, but the contract and payments mechanics will be slightly different. This is to make sure that PSC freelancers who are Inside IR35 are able to still have the freedom to set their own rates (which is part of the transparency of the YunoJuno platform) but also that all the deductions and payments to comply with HMRC rules are done.
YunoJuno has partnered with Giant Business Connect for this, so for all Inside IR35 assignments, PSC freelancers will see two changes:
Their contract will be with Giant Business Connect (who will then supply them to YunoJuno).
They will see two assignment fees in the YunoJuno platform at the time they agree a contract with a big client - so that they fully understand the consequences to them of being Inside IR35.
A PSC freelancer’s contract with Giant Business Connect is based on the standard YunoJuno freelancer terms - the only bits that are different are really just the mechanics.
Managing HMRC obligations appropriately requires specialist skills. Giant Business Connect has expertise in this area from the public sector, and they will provide help and support to PSC freelancers to help them understand their own personal tax consequences of doing an Inside IR35 assignment.
In HMRC-speak, Giant Business Connect will be the “fee payer” and the “deemed employer” of the PSC freelancer. They will make sure that all the correct deductions and payments are made.
Timesheeting and all the other aspects of the YunoJuno platform will remain the same (including support for non-payment related issues).
How will an Inside decision affect payments to PSC freelancers?
Firstly, the 14 day payment guarantee that we offer to all freelancers will remain. YunoJuno commits to this for Outside IR35 assignments and we contractually require Giant Business Connect to commit to this too.
We’d love to be able to do personal tax calculations for PSC freelancers on the YunoJuno platform, but we’re not accountants, and it requires specialist expertise.
What we can do on the platform (because we want to be very transparent) is provide PSC freelancers with a calculator that helps them understand how the fees for Inside IR35 assignments will work. There are business costs involved in being the “deemed employer” under IR35 and Giant Business Connect will charge a margin for its services to YunoJuno. IT's important to note that the Giant Business Connect's charge is a straight 'pass-through' charge and YunoJuno does not make money off this transaction.
Here is an example of an inside IR35 payment based on the following assumptions:
1) A Freelancer Assignment Fee of a single day at £300;
2) A Basic Rate tax code
NB: Some figures rounded to the nearest pound.
Click here to see more information on the client and freelancer assignment fees.
Click here to see the calculator.
Giant Business Connect will be supporting PSC freelancers who agree to an Inside IR35 assignment, including onboarding and helpdesk support. PSC freelancers may also have personal accountants for their PSC already.
Giant Business Connect (GBC) as a Deemed Employer is different to their other business - Giant the Umbrella Company.
As mentioned above a Deemed Employer is a way for PSCs to take inside IR35 contracts without having to change their business structure. So it handles the very specific IR35-related tax obligations that relate to that individual assignment. This route does not provide benefits like a traditional employer such as Statutory Sick Pack and Holiday Leave.
Deemed Employment is ONLY about tax - and only about IR35-related tax. Giant the Umbrella Company is an employer (for employment law and tax). As such, you are entitled to statutory employee benefits (along with any other benefits they choose to award their employees) and you are subject to ordinary PAYE arrangements.
And just to be absolutely clear - you are under no obligation to change your structure, or join an Umbrella company. However, If you wish to continue providing services via your PSC in an Inside IR35 contract, you must have a Deemed Employer.
How will onboarding work?
After accepting an Inside IR35 assignment on the YunoJuno platform, a subset of data related to it will be automatically exported to Giant Business Connect’s systems and this will trigger Giant Business Connect’s onboarding process. This process only needs to be carried out the first time a PSC freelancer takes an Inside IR35 assignment. (YunoJuno has agreed a detailed Master Services Agreement with Giant Business Connect, and a detailed data protection agreement.)
Giant Business Connect will also help PSC freelancers understand the tax consequences of the particular assignment they have agreed to. This will involve knowing the PSC freelancer’s actual tax code, etc.
Once Giant Business Connect receives a PSC freelancer’s details, Giant Business Connect will reach out to the PSC freelancer to give them access to the Giant Business Connect portal where the PSC freelancer will be able to fill out some required details. Giant Business Connect will also carry out its own compliance checks at this point.
How will billing work for Inside IR35 assignments?
The process for PSC freelancers will be very familiar:
Fill in & submit YunoJuno timesheet.
Client approves timesheet (and provides YunoJuno with a valid internal client PO number along with it, if necessary).
PSC freelancer gets paid in 14 days.
Giant Business Connect will be providing a self-billing service, where we send them Inside IR35 PSC freelancer’s timesheet data weekly after we have fully approved the related purchase order. Once they have that data, Giant Business Connect will set up a payroll run.
Giant Business Connect account & self-billing data will be accessible to PSC freelancers via the Giant Business Connect online portal.
Are there other options available for PSCs taking Inside IR35 assignments?
No, due to the complexities of the legislation and the payroll specifics involved all PSC freelancers taking Inside assignments will be required to take this route. There are however other routes available to the freelancer, which may be helpful in making the final decision.