Preparing for IR35 Changes – what I’ve learnt, and something worth shouting about.
Posting date:27 Nov 2019
Over the last six months or so it has felt a little like going back to Law School as I have tried to develop sufficient expertise on the changing IR35 landscape to enable me to give meaningful advice to our Customers. It has been a long and winding road. Myself and the IR35 Project Group at Stanton House are now engaged in numerous Client Briefings and sessions with our Interims and the broader candidate customer community to advise them in preparation for the anticipated changes.
This is part education, part reassurance and partly about connecting our Customers with the right third-party experts and solution providers to best navigate the changes. In the midst of this, I would like to share a few things that are on my mind and that I believe are worth shouting about.
The method for determination of IR35 Status is not changing.
In the new world, post April 6 2020, End User Clients are not liable for unpaid Tax & NIC should an outside IR35 determination later be found to be incorrect – the Fee Payer (i.e. the recruitment business or MSP) carries that liability. As long as the End User Client applies ‘reasonable care’ in making the determination, they are protected [and responsible Recruitment Businesses and Contractors will ensure this risk is Insured – throughout the supply chain.]
On this basis, it seems to me that if all parties take a deep breath and take time to really think it through, we can work through the change without too much disruption and pain.
I don’t think it is contentious to say that all parties recognise there are a large number of contractors currently working Outside IR35 who should be operating Inside. They are doing BAU roles, and based on the changes in April next year, will have tough decisions to make as they will no longer be operating under their current arrangements. But it is also true that there are large numbers of Interims / Contract Workers who are quite correctly operating Outside IR35 who are feeling threatened.
I appreciate that HMRC have a responsibility to maximise the UK Tax take, but I very much hope that the most recent pronouncements don’t lead to further ‘blanket’ Inside IR35 determinations from UK Corporate. There have been a significant number of well publicised statements from large companies stating that, from early next year, they will no longer engage Outside IR35 Workers. Based on my understanding of the changes on their way in April, I believe that these blanket policies will disrupt the market in a way that is unnecessary – and not in the interests of either the Company themselves, or the Contract Workers.
We very much hope that the dust settles quickly, and that UK businesses chose to implement an approach of ‘case by case’ determinations that enables genuine providers of Services to operate Outside IR35. This is what HMRC themselves are calling for (HMRC are publicly very much against Blanket Assessments) and there are IR35 Status Assessment Tools available to do this in a highly compliant and efficient manner, Tools that also incorporate insurance against any future challenge of the IR35 determination.
Recruiters and / or the Contract Worker themselves are generally happy to fund the Tool (Stanton House certainly are). There would be no cost to the Client Company, and they would also be indemnified against any future Tax / NIC liability.
I and my colleagues at Stanton House will keep shouting loud to spread the word about the approach we very much believe is in the interest of all parties. An approach that facilitates the UK Tax Authorities collecting appropriate tax revenues without disrupting the flexible labour market in the UK that I believe is a critical component to our resilient economy battling through these troubled times.
We will be producing an IR35 focused white paper before the end of the year working with our incredible partners Qdos, to provide a comprehensive view of your options in the lead-up to and post IR35 legislative changes in April. Please do get in touch if you would like a copy of the paper once it's published in December!
"I have known Kate for years and she has always invested time to develop the relationship even when I am not looking for a new role. Now that time has come it has led to a much easier and in depth conversation around what that next role should look like."