IR35: Contractor safety – why advance planning is essential

Seeking shelter

May you live in interesting times!

Interesting (if confusing) times are faced by the UK contracting industry.

The usual haven in such circumstances is to return to tried and tested working arrangements and ride out contrary currents before regathering and moving on. For contractors this means using an umbrella or a Limited Company.

That choice is no longer as simple as it was once perceived.  The channels to safety have changed and the appropriate route forward is now being driven by three influential factors.

Extension of off-payroll working in the private sector

At least 80% of contractors will be aware of the changes to the IR35 rules set to arrive in the private sector in April 2020. Less well known is the fact that the determination for an inside or outside IR35 role applied from the payment date. If your contract ends pre-April 2020, but payment is made after this, the new rules apply.

Advance planning is essential.

Is your role seen by your end client, inside or outside IR35? Can payment cycles be accelerated? Does your end client know enough about the new rules? Have you discussed this with them? Is there an intermediary in the picture? What are they doing?

We can expect more scrutiny from HMRC of “outside IR35” roles when the new rules bed down. They will have a smaller population to police and more powers. The only way to resist such moves is to have a full audit trail of why decisions were taken, by who and at what time. That has to begin with this period, leading to payments and contracts that will span the start date.

There are some simple rules here.

Critical performance

The manner in which the role is performed is critical. The documents must match these facts, not vice versa. Do not allow a third party whose motives may vary from yours, to dictate the decision. Ultimately the cost of getting this wrong is likely to find its way back to you unless your contract is watertight. Is it? 

WTT’s team of experts speak with contractors every day. We are aware of moves in the market designed to frustrate HMRC’s very clear objective of “maximising revenue”. We know that some end clients are well prepared, some not. We know that intermediaries are being “creative” and are presenting contractors with seemingly little choice but to accept plans that will certainly be investigated and may fail.

You must get advice that is YOURS.

Speak with us – first hour is free – explore what we can offer from review to contract wording to umbrella services to preparation for enquiry to historic enquiry protection.

Brexit

As we near the 31 October 2019 a no-deal Brexit looks possible.

Predictions range from business as usual to the fantastical. Uncertainty will be inevitable.

It does seem likely however, that a Conservative government (if it exists) will focus in the mid-to-long term on encouraging business in the UK. Tax incentives may be available. If this were to transpire banking institutions and others will seek to retain their freelancers.

Some will wish to do this at lowest cost, accepting a higher potential risk. Others will take the opposite approach.

This of course, brings into stark focus the need to plan on a long term basis with a practical adviser who can guide you through changes, however great and unprecedented they may be.

HMRC attitude and enquiry

HMRC lives by a dogmatic “maximise revenue” credo. Expect increased activity and perhaps more retrospection.

Many contractors have lost faith in contracting and have moved into employment. Many others plan to close down their Limited Company via our dedicated service and join The Contractor Co-Operative.

Clearly using an umbrella that pays tax on every penny received you removes the risk of an IR35 investigation. An umbrella that does not subject every penny to tax, increases the risk of enquiry.

We see fertile ground for tax avoidance structures. Don’t let yourself become part of one. Any adviser worth their salt will sit down with you and plan for the tax changes. They will help you decide if closing down your limited company is right for you: they will plan stages in your financial future (school fees, retirement, etc.) and they will ensure that you know the consequences of your decisions. Most importantly they will anticipate and look to prevent issues arising later.

Contractors have traditionally seen only to short term horizons and have been willing to be told what to do. That cannot survive in a world where individual liability becomes more likely.

Take control; look longer; be aware.

Summary

In summary change brings uncertainty. We have seen Morgan Stanley and HSBC indicating that they will no longer take on contractors. We have seen “initiatives” from intermediaries in contracting that need more research. We see commercial motives at play that will take time to work out. Some will survive, some will not.

Contractors are the pivot in all this. Without you either accepting more risk or agreeing to changes in work patterns and roles, end clients and intermediaries are powerless. Of course, there is a balance in that you wish to work but not at any price.

You have leverage and you need to use it. Many contractors have suffered by using, unquestioning, “schemes” and stratagems. Most have failed. Do not let it happen again.

We would like to discuss how we can help you navigate this uncertain period. You need experts on your side. Contact us  info@wttconsulting.co.uk