IR35 Recap – what’s happening
From April 2020, following changes to the public sector in 2017, the government will be extending the off payroll working rules (“IR35”) to companies in the private sector, although small companies will be exempt.
This will significantly impact the way some clients and agencies engage temporary workers. The key change is that the responsibility of defining the IR35 status will transfer from contractors operating their own personal service companies (“PSCs”) to the end-user client.
Clients will now be required to individually assess each role as being “inside IR35” or “outside IR35”. They will do this by issuing a Status Determination Statement (“SDS”) and cascading it down the supply chain to the fee payer (generally the recruitment agency) and the contractor.
If they fail to make this assessment, they risk being in breach of “reasonable care” imposed by the new rules. Agencies will bear the brunt of the liability in the supply chain for an incorrect determination, however liability for tax can be transferred back to the client in certain circumstances.
IR35 Review – How to prepare
For those who haven’t already, clients will need to urgently look at how the new legislation is best integrated into the procurement of their contingent staff to limit the risk of non-compliance. You should assemble a steering group who should consider the following:
Other considerations include:
- What is your approach in terms of risk?
- Who is responsible for undertaking the supply chain review for each team and/or making the status determinations?
- How will you make the status determinations – Online CEST tool? In-house experts? External third-party? MSPs?
- How many of your contractors are working for you directly, meaning you are the “fee-payer”?
- How will you pass your status determinations down the supply chain? Who will manage and own this?
- How will you ensure that your determinations are made with “reasonable care”?
- How will you deal with status determination disagreements and queries?
Time to prioritise!
Clearly your first priority is reviewing your contingent workforce and assessing which contractors are “business critical” and are required post-April 2020. Furthermore, also review:
a) your contracts and assignments with end dates beyond 6 April 2020,
b) any contracts that you are currently negotiating that will expire beyond that date, and
c) any contracts and assignments that you are likely to extend beyond that date.
Then, review the types of contractors you currently use, the types of roles that you need to fill across your lines of business and start to consult with your MSPs and/or recruitment agencies on their approach.
How WTT can help
IR35 is a niche area of the law. Many clients do not have the necessary understanding of IR35 and the employment tests behind it, to ensure compliance. This is where our dedicated legal team can help.
Authorised and regulated by the Solicitors Regulation Authority, we specialise in IR35 compliance and have a long history of working with clients to help them navigate through legislative changes to reduce risk and exposure. In addition to helping you prepare, we also offer an IR35 helpline to assist with on-going support post-implementation.
Contact info@WTTLegal.co.uk to arrange a free consultation to discuss your contractor workforce and potential solutions including Statement of Work (“SOW”) and consultancy alternatives.