IR35 delay – no time to sit back
We are all acutely aware that the IR35 reforms have been subject to widespread condemnation, progressive and wide-ranging campaigning against its introduction and most worryingly knee-jerk reactions from some of the UK’s biggest commercial organisations. What is perhaps surprising, therefore, is that despite this continuous pressure keeping it on the table for discussion, it was as a result of one of the measures taken by the Government to fight the COVID-19 pandemic currently engulfing us, that finally caused a postponement in its roll out, announced this week.
Whilst this is welcome news which, I hope the contingent workforce supply chain uses to avoid the kind of damage we have seen in the industry, it was what I saw next on social media that concerned me greatly.
The overwhelming sentiment was that “IR35 has been delayed”. If true, that would be an impressive feat for something that has been in legislation in substantially the same form for nearly 20 years.
Whilst it is very possible this was just poor terminology and what was really meant was that the reforms, that put the status determination on private sector end clients rather than the contractor, had been postponed. However, the more and more I read, the more I came to believe that people thought they could now operate without any fear or consideration of IR35.
Let me be very clear here – you cannot!
Ignore IR35 at your peril
IR35 is still as relevant, complex and dangerous today as it was back on the 6 April 2000, and to operate with disregard to this could be detrimental to your financial future. Rightly or wrongly, HMRC see those that operate outside IR35 as largely non-compliant. They recently made a bold, and probably incorrect, statement in the House of Lords that they believe 9 out of 10 contractors are wrongly categorised for IR35.
Whether that statistic is correct or not is irrelevant, if HMRC think that then it believe that there is significant under-assessed tax in this area that is worthy of its attention and resource. For a department that has just been given the task of plugging an unexpected £350bn in the nation’s accounts, that will prove and irresistible starting point.
There will be no soft landing
Not only that, but with the delay of the reforms also goes the promise from HMRC to give a soft landing in 2020/21 and draw a line for those that move from outside to inside IR35. Therefore, any IR35 investigation will not only look at the current engagement, but likely look back over at least the last 4 years of engagements to check compliance. For those that have not given genuine consideration as to whether the engagement is inside or outside, they could be facing significant liabilities if investigated.
Assess your working practices
The term ‘blanket assessing’ has been used over the last 12 months to describe those end clients that deem all their engagements as inside IR35. Many contractors considered such a move foolhardy and detrimental to the contractor.
Now is not the time for contractors to make similar blanket assessing of all their engagements as being outside, as this would be equally foolhardy and detrimental if wrong. You should seek independent advice that looks at the contracts and the actual working practices to produce an assessment that reflects the reality.
Then, should the assessment be deemed inside, your adviser should also be able to discuss with you whether reasonable adjustments in working practices may keep you outside IR35, where this has traditionally been the determination.
As above, the additional 12 months are very welcome, but I urge all stakeholders in the freelancing industry to use this time wisely. If you wish to discuss how you can work in compliance of the legislation, or have any new engagement reviewed, please contact WTT to find out how we can help.