IR35 Reform Delays: Answering frequently asked questions
The Government announced that the IR35 reform in the private sector, which was planned for the 6th April 2020, would be deferred by a year until the 6th April 2021. The delay was decided on due to the COVID-19 pandemic, to help relieve the strain on businesses during this time.
The Government were clear that this is a deferral and not a cancellation of the reforms. Now that we have had time to digest the news, we wanted to share with you the answers to some questions you may have.
What does the IR35 delay mean for contractors?
The deferral simply means that limited company directors working on contracts within the private sector will continue to have control over assessing the IR35 status of their contracts until the 6th April 2021.
What does the IR35 delay mean for end-hirers?
For end-hirers within the private sector, the delay means that they will not have the responsibility for assessing the IR35 status of contracts themselves until the 6th April 2021, nor will they have any legal obligation over IR35 status until then.
For any organisations who were still deciding on how they were going to approach the reforms, this delay will likely be well received for the additional twelve months of preparation.
I changed which structure I work under; can I go back to working through my limited company?
Really, it is up to you how to choose to structure yourself as a contractor. If it was your choice to change structure from working through a PSC (personal service company) to an umbrella employee or agency worker for example, then you can absolutely return to working as a limited company director if your limited company has been put into dormancy.
However, if it was a decision from your client that you had to work in a certain structure in order to continue with your contract, then it is up to your client to agree that they are happy to engage contractors working through PSCs. If this is the case, then it would be worth speaking with your client in the first instance.
I’ve made my limited company dormant following being told my contract would be assessed inside IR35, what should I do?
As above – if the decision to engage a contract under a certain structure was made by yourself, then you can take your company out of dormancy and begin working as a limited company director again.
However, if the dormancy of your company was in response to a decision made by your client then speaking with them would be your first step in seeing that they are happy to engage a PSC for your contract.
My client has already deemed my contract inside IR35 – what can I do?
Whilst there is now no longer a legislative obligation for a client to determine the IR35 status of your contract, if they had previously made an ‘inside IR35’ determination which lead to them changing the way they engage you, it would be inadvisable to simply ignore this. If your client has determined the role as inside IR35 and took reasonable care to do so, the role should still be treated as inside IR35. Until April 2021, for private sector engagements, it is your responsibility to apply the rules correctly. If you disagree with an inside IR35 assessment you should have your contract and working practices reviewed by an expert. As has always been the case.
What happens if my client hasn’t assessed the IR35 status of my contract yet?
If your client was yet to assess the IR35 status of your contract, then they now have no legal obligation to do so until the 6th April 2021. Therefore, the responsibility for IR35 compliance continues to sit with you.
I work in the public sector, will the delay affect me?
In short, no. The deferral of IR35 reforms only affects medium and large private sector businesses. For any contracts you have within the public sector, the legal obligations of IR35 continue to sit with the public sector organisation and the party who are paying you.
Will any of the rules regarding the reforms be changed along with the deferral?
As far as we know, the deferral will be just that, the same rules but applied at a later date.
Should I have an IR35 review?
IR35 can be a tricky piece of legislation to get your head around. As such, we do advise having each new contract professionally reviewed before engaging, for your own peace of mind that you’re taking care of your tax obligations correctly.
My client has already assessed my contract as outside IR35. What should I do?
If your client has assessed your contract as being ‘outside IR35’, then there technically isn’t anything you need to do. However, as the tax obligations regarding IR35 continue to sit with yourself, it may be worth you looking into the status of your contract yourself for your own peace of mind. You may find a professional IR35 review of your contract helpful for this.