IR35 review – A hollow promise
On Tuesday, the Treasury launched its review into the Off Payroll working rules, due to come into effect in the private sector on April 6th. This IR35 review was promised by Chancellor Sajid Javid whilst on the campaign trail in November when he was interviewed on Radio 4’s Money Box. During the interview he stated that one thing he wanted to look at in particular were the “proposed changes to IR35”. He went on to add that he wanted to “make sure that the proposed changes are right to take forward”.
However, it is now apparent that the promised “review” (which will be concluded by mid- February) will only entail a probe into the actual implementation of the reforms, not the appropriateness or fairness of the reforms themselves. In fact, the Treasury has now confirmed that the scope of the review would be limited to “determining if any further steps can be taken to ensure the [reform’s] smooth and successful implementation”. When pressed on this U-turn by MPs at Treasury Questions, the Chancellor refused to answer.
IR35 is here to stay
Contractor groups were previously cautiously optimistic that Sajid Javid would fulfil his election promise. Now, they are understandably furious that the government has clearly just paid lip-service to pledges given during the campaign in the interest of getting votes. In addition, businesses have just weeks to make sweeping reforms to their payroll during what is already a disruptive and uncertain time with Brexit. Undoubtedly, skill shortages will take their toll on employment confidence during this transitional stage. The five week “review” period proposed by the government is clearly not sufficient. It is nowhere long enough to fully consider the complex range of issues relating to the impending legislation.
Nevertheless, it is now clear that the legislation will be coming into effect this April as planned, with possibly only some minor tweaks. So businesses and contractors alike should take the announcement as final confirmation that the government is committed to driving the Off Payroll rules in the private sector forward, despite promises made in November.
Obligation to act
So, if you are a business or an agency and haven’t done so already, you urgently need to get your house in order. This involves conducting risk assessments of your workers, taking advice relating to your contractual arrangements and ensuring that you understand the new obligations that the legislation will impose on you. If this is done, there is absolutely no reason why you should be concerned about engaging contractors. Just rensure you have robust processes in place to mitigate risk and ensure compliance with the new legislation.
If you are a contractor, it is now absolutely essential that you understand the impact that the changes will have on you, what a status determination statement means and why it is important to have your contract reviewed to ensure it reflects your actual working practices. Where you are already comfortably working outside IR35, you may now wish to seriously consider other alternatives, such as working on a Statement of Work (SOW) basis. This could be beneficial for both you and your client. However, a SOW is clearly not appropriate for every contractor and a thorough risk assessment must be conducted to ensure that it is a suitable solution for you.
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