What does the IR35 review really mean for clients and contractors?
The Government’s decision last week to review IR35 legislation has caused further confusion amongst clients and contractors, with some perceiving this to be a delay to the reforms that are due to come into the private sector in April 2020.
This is not the case; despite the pledge to review the off-payroll tax rules, the Treasury is still pressing ahead with its original 6th April deadline, meaning the countdown to comply is very much on.
The review, as detailed in the Treasury’s comments, positions it as a consultation to ensure the implementation of these changes is as smooth as possible, by determining whether any further steps should be taken. In doing so, it has been hit with waves of criticism, with many saying how the Chancellor is simply paying ‘lip service’ based on his pre-Election campaign trail promises to review the legislation.
Whatever the reasons behind the review announcement, it is another distraction to IR35, which together with the Election and Brexit, has meant that many private sector businesses are yet to begin preparations.
These companies who continue to bury their head in the sand are posing major risk to their operations. Based on lessons learned from the 2017 public sector rollout, it’s clear that those who do try to cut corners – for example, with blanket assessments – risk losing their contractor workforce to a competitor. A cautious approach that sees a business deem its entire contractor population as inside IR35 would only create further problems, with the risk being from contractors leaving their roles to pursue other assignments or demanding increases in pay rates.
As one of the world’s largest talent specialists, we’re continuing to support our client and contractor base affected by the upcoming changes. Flexible workers are a major contributor to global economies, and it is crucial that end clients assess their contractor workforce fairly, and on a case-by-case basis, to prevent genuine PSCs (personal service companies) from being wrongly placed inside IR35 and vice versa outside.
Those with larger contractor populations face little time to prepare if they haven’t begun doing so already, with the coming months proving a time-critical period for those affected.
There’s also a misconception amongst some businesses that we at Morson are accountable for determining IR35 status, yet it’s the responsibility of the end client to conclude on their workforce’s IR35 position.
Together with our expert IR35 partners we’re supporting our clients, and other private sector companies, to ensure they demonstrate the reasonable care that is required throughout the employment status review process.
Relying solely on HMRC’s CEST tool for determination may also see some companies fall foul come April, with the flaws and risks posed by CEST being widely highlighted; and this proving the catalyst for us creating our own independent review process.
Whatever you take from last week’s IR35 review announcement, you can rest assured that the April 2020 deadline is very much looming, with those operating in the private sector needing to get their house in order ahead of this date.
For whether you are an end client or contractor our expert team can support you from help and advice to a full review of your contractual workforce. Contact our IR35 team on IR35@morson.com or call our Contractor IR35 Help Line on 0161 786 2377