IR35 changes have been making headlines since reforms were rolled out in the public sector in 2017. With off-payroll legislation subject to heavy criticism from contractors and engagers alike. Now, imminent reforms in the private sector – which will see end clients become responsible for determining contractor status – are seeing businesses look around for other ways to access the expert support they need. Consultancies have been floated as one answer to this problem. Often operating as a group of skilled professionals providing services rather than a sole contractor, there is some noise that suggests they may be a safer option. But is this true? And could we see a rise in consultancies as IR35 changes hit in April 2020?
A Grey Area
It’s important to be aware that consultancies are not a silver bullet when it comes to IR35 reform. It’s very likely that HMRC will be on the lookout for consultancies that are not providing services through a SOW (Statement of Work) agreement or similar but who are actually providing personal labour. Consultancies who are providing personal services will have a responsibility to provide status determinations. Seb Malley, CEO at Qdos Contractor provided advice on the matter recently, saying, “the services the consultancy provides must be genuinely ‘contracted out’ and not merely a ‘provision of labour’ disguised as a consultancy agreement.” However, it does seem likely that we will see a spike in services provided via SOW, as solo contractors return to the permanent workforce and organisations look for new answers to their workforce challenges.
Will Contractors Club Together?
Another question is whether contractors will band together to create new consultancies in order to retain clients and to maintain a profitable enterprise outside of returning to in-house roles. It’s difficult to say what, if any, real protection this would provide, particularly if the services were being provided in the same manner as they had been in the past. It’s also unclear whether this would simply create further legal and financial complexity for the contractors in question.
In reality, an IR35 workaround does not exist; it’s vital that organisations prepare carefully for the upcoming changes. We have partnered with Brookson Legal to create a complete IR35 solution for organisations across the UK. Providing support with determinations and access to expert legal advice. Contact us to find out more about this innovative solution and how we can support your business through the coming reforms.