With less than 6 months to go until off-payroll reforms hit the private sector, it has never been more important to be IR35 ready. But with complex legislation to tackle and uncertainty surrounding which contractors will fall inside and outside of new rules, some organisations remain unsure about how to move forward.
IR35 is legislation related to off-payroll tax reforms that are coming to the private sector in April 2020. These changes have been designed to prevent ‘disguised employment’. This is where contractors are treated as employees but pay limited tax and national insurance contributions by providing their services through an intermediary – usually a personal service company (PSC). HMRC believe this practice is being abused and has resulted in a significant loss of revenue for the government. The new rules will apply to medium and large businesses, defined as meeting two of the following criteria – having more than 50 employees, a net turnover of over £10.2m or a balance sheet of over £5.1m.
We believe that with a clear strategic plan and expert support, every business can be IR35 ready before April. Below are three key actions you should be taking as you prepare for off-payroll changes.
Review Relationships and Contracts
You need to conduct a review of your entire workforce to identify contractors who are providing their services through a PSC, this may include workers engaged through an agency or third party. You will then need to closely examine the relationship and contract that defines each agreement. The review process may be lengthy, but it’s important to consider each relationship individually against key criteria. Remember, it’s not just contract wording that will determine the nature of the relationship – HMRC will look at day-to-day working practices when considering whether a determination is correct. Some key questions to consider are:
You may need to plan for extra resourcing to carry out this task, outlining the most efficient way to move some contractors across to PAYE. You should also be prepared for a loss of skills as some contractors reject a fundamental change in your working relationship to pursue other opportunities.
Implement Best Practice
You can’t simply stop being IR35 ready after the initial review process. You must put in place best practice in contract wording and engagement practices to protect both your business and self-employed contractors in the future. It’s useful to outline the resources you will need to accomplish these changes and update recruitment and sourcing practices accordingly. Off-payroll reforms will continue to impact your business long after April 2020 and you need a strategic plan to continue to meet these challenging obligations. You should also provide training and practical advice for your internal teams.
Seek Expert Advice
IR35 legislation is dense and complex. Although it is possible to go it alone, this is an arduous and lengthy task that could leave you at greater risk of investigation or financial penalties from HMRC. It’s highly recommended that businesses seek expert advice to ensure they are ready for the changes ahead and protected in the future. Specialist support can also help you to remain focused on your core business.
Cititec have partnered with Brookson Legal to develop a complete solution for IR35 challenges. Combining years of technology recruitment experience with expert IR35 legal knowledge, we are helping UK businesses to overcome their complex off-payroll challenges. We even offer the protection of professional indemnity insurance against legal challenges from HMRC on every determination made.
Get in touch today to discover how we can deliver personalised support on IR35 - email firstname.lastname@example.org.
Join us at Devonshire Terrace on 20th November at 8.30am to 10.30am to hear from IR35 experts and discover solutions to key off-payroll challenges.