With the planned private sector IR35 implementation delayed by 12 months, we have asked experts Paul Lloyd and Matt Fryer to take a look at some of the most frequently searched terms for IR35, sharing their thoughts on what each of these mean for End Hirers, Recruiters, and Contractors in preparation for IR35 April 2021.
What impact has COVID had on IR35?
The delay to role out IR35 to April 2021 really – and the reason the government has done this is because businesses are going to struggle over the next 12 months to implement a big business change against the backdrop of the COVID pandemic so that’s a big impact. It will be interesting to see the impact COVID has on the economy – it feels like there’s a recession coming and the ability for businesses to flex their workforce during that period will be important as well so we might see growing use in off-payroll workers.
What IR35 tools are available
There are lots of algorithm-based online tools that give an automated IR35 status decision. There is one out there which is free to use and it’s available on the government’s website called CEST (Check Employment Status for Tax). BUT there are lots of concerns around the accuracy of that.
There are others as well, some better than the rest, but the jury is out as to whether any of them give that non-mechanistic approach to status decision making that the courts require.
Will companies blanket ban IR35?
More than likely, yes, which is what happened with the public sector changes in 2017. We saw it in the run-up to the changes before they got delayed for April 2020 and companies may look to do it because it’s easier, but the obvious point is they’re going to find it extremely difficult to attract talent and it’s not taking reasonable care in making sure a correct assessment has been performed.
Prior to April 2020, it resulted in a lot of disgruntled contractors, a lot of them asking for rate increases, and a lot of them challenging the process as well so I think hirers taking a blanket ban approach could find it more problematic.
How do I complete an IR35 audit?
An IR35 audit is essentially trying to establish whether a particular contract is one of an employment relationship or not but to do that there are two things you need to be looking at:
One is what is written in the contract(s) – you need to look through those and around the employment status tests. Second is to make sure that those contracts are actually being performed in practice and in-line with the contract – look at the working practices around how you engage and treat contractors in your organisation.
How to stop IR35?
I don’t think we’re going to stop the legislation changes but maybe the question is how do you stop IR35 impacting?
And the recommendation here would be to look at engagement points not just being one of employment and that needs collaboration between everyone in the supply chain.
There’s no silver bullet to this. It’s about understanding and applying those employment status tests for each contract.
Is IR35 good or bad?
I suppose it depends on what lens you’re looking through. The legislation when it was originally brought, in back in 2000, was brought in for the for all the right reasons as it was to stop non-compliance and identify where people weren’t paying the correct amount of tax. The question around whether it’s good or bad would be more directed around the changes that are coming in, and again, it’s probably not a bad thing being the client’s responsibility to make the assessment, they have no vested interest in terms of how that contractor should get paid. The contractors making their own assessment have financial gains out of answering the questions in a certain way to be outside of IR35, so the least biased person in that supply chain is the client, and putting the responsibility with them is probably a good thing overall.
The difficulty is that we’ve seen over the last three years that these changes aren’t implemented properly and clients take or don’t take the right advice and don’t get external specialists to look at this, sometimes taking a blanket approach which isn’t good.
Is IR35 the end of contracting
No, definitely not. This is not the end of contracting and there have been lots of different iterations of different legislation over the past 30/40 years that have affected the flexible workforce as a whole and over that time people have said this will be the end of contracting and it certainly hasn’t been. Flexible working is one of the fastest-growing areas in the UK industry and the UK relies hugely on flexible workers.
The way that IR35 April 2021 is assessed hasn’t changed it’s just the person responsible, so those working collaboratively and with the supply chain who are taking reasonable care in their assessment then this shouldn’t have any impact in terms of future contracts opportunities.
Brookson Legal is an SRA regulated law firm that provides a range of IR35 solutions to the flexible working supply chain.
Part of the Brookson Group, they have been supporting hirers, agencies and contractors with IR35 for over 20 years, carrying out thousands of employment status assessments each year.