The latest version of IR35 legislation was introduced in April 2017 as an off-payroll reform for the public sector and is a term used to describe two sets of tax rulings developed by the UK Government to combat tax avoidance by contractors. These can be defined as people engaged by a company, usually for limited time periods and who supply their services via a third-party vehicle such as a limited company and are therefore not on the hiring company’s employee payroll. The contractors are referred to as “deemed” or “disguised” by Her Majesty’s Revenue and Customs (HMRC) as they are off the official payroll.
With revised IR35 rulings, an HMRC inspector will essentially attempt to disregard the written contract in place between the worker and their client and use the actual nature of the working relationship to create a ‘notional contract’. In short, IR35 involves applying the three main principles of: control, substitution and mutuality of obligation, to determine the employment status. Not surprisingly fundamental knowledge of employment law is required to be able to fully understand these rulings which can be complex and expensive for the contractor. If he or she just ignores IR35 it can become very expensive, with substantial back payments and fines, as has been evident in several celebrity cases recently.
What about going to fulfill a contract in Switzerland?
In Switzerland the parameters are more straight forward: when accepting a contracting role (longer than 3-months), the contractor must work with a Swiss SECO-registered employment services company such as Accurity (www.accurity.ch). Note: SECO is the Swiss State Secretariat for Economic Affairs and the federal government’s centre for all core issues relating to economic and labour market policy.
The employment services company then calculates the contractor’s payroll according to Swiss Law and makes all legal deductions and statutory payments.
Accurity provides very competitive retention rates, through careful tax planning with monthly salaries and a choice of tax saving pension schemes. They also pay the contractor a fixed monthly salary, even if any holiday entitlement is used (20-25 days per year plus Swiss public holidays). This not only simplifies the contractors’ financial planning but also optimises the source tax rates they pay by averaging income over the contract.
In summary: the IR35 ruling will not be a problem for the contractor in Switzerland assuming (s)he works with a payroll company such as Accurity. It makes sense to do this from the first day in Switzerland and completely avoid IR35.
Footnote: Accurity GmbH was founded 20 years ago by contractors and the original founders continue to lead the Accurity team with the same dedication to customer service and excellence as the day we started. Contractors are the heart of our business and we are here to look after you and your employment needs in Switzerland. We also support recruitment agencies from around the world who want to place contractors or permanent staff in Switzerland. We provide and work to strict non-competition clauses in our agreements. Our role is to leverage our expertise to fulfil the legal and financial employment requirements. We make Switzerland easy for you.