What the IR35 Reform Delay Means For Contractors
The shock announcement on Wednesday that the off-payroll reforms will be pushed back to 6th April 2021 has been received positively by the contracting community. According to recent data, 84% of recruitment businesses surveyed earlier this week welcomed this move. It has also sparked much debate at what this means for contracting for the next 12 months.
Why was the IR35 delay announced?
The postponement is as a result of the government’s response to supporting businesses in the current COVID-19 crisis, rather than a change in government policy.
The investment and resources spent on preparations to date will not be wasted and it is an opportunity for businesses to refine and continue their planning for the commencement on 6 April 2021.
Was the IR35 delay announced too late?
Many have raised concerns that this has come too late to have the desired effect. As the market adjusts to this news and the ongoing challenges presented by the COVID-19 crisis, it remains to be seen whether companies that have issued policy decisions to ban engaging with limited company contractors will reverse these decisions.
Our survey sent to our agency partners this week confirmed that 58% of agencies are unsure as to whether their end hirers will reverse these bans and 21% are confident that they will not.
What happens if a Status Determination Statement has already been issued by the end hirer that states the role is inside IR35
Whilst the legislation that introduces the Status Determination Statement (SDS) has been pushed back until April 2021, it would be inadvisable to simply ignore an existing SDS. If the end hirer has assessed the role on an individual basis using reasonable care, it is not unreasonable to assume that this could be used by HMRC in the event of an investigation.
An SDS is not legally binding at this point, but it still gives an indication that the end hirer believes the engagement to be inside IR35. Simple ignoring this determination this is risky for you as an individual and potentially the rest of the supply chain.
What if I disagree with a Status Determination Statement?
Whilst the legislation that introduces the SDS has been pushed back to April 2021, it would be inadvisable to simply ignore an existing SDS. If the end hirer has assessed the role on an individual basis using reasonable care, it is not unreasonable to assume that this could be used by HMRC in the event of an investigation. Whilst it is true that the SDS is not legally binding at this point and is subject to challenge, it shows that the end hirer believes that this engagement is inside IR35. Simply disregarding this would be unwise for the contractor and potentially the rest of the supply chain.
This is not a suspension of the IR35 rules, it is a delay to the reforms. If your contractor disagrees with an existing SDS they should get their contract and working practices assessed by an expert, as they would under the existing rules, to ensure they are applying the legislation correctly.
At this time the entire supply chain must act responsibly. If the contract is indeed inside IR35 then it should be treated as such and this has not changed.
At the same time, those businesses who introduced blanket bans to deal with the reforms are strongly encouraged to revisit their policies and use the time to take a more measured approach. Engaging skilled limited company contractors is perfectly manageable and compliant for all parties with the right contracts and working practices in place.
SJD has the expertise to support you with this. Our expert IR35 team and review service will help ensure you are operating compliantly.
Where contractors are in fact inside IR35, we encourage them to not take risks and operate a deemed payment or consider alternative arrangements like a compliant umbrella or PAYE option.
When we asked businesses if they would allow contractors to be re-engaged via their own PSC, 68% confirmed that they would, with 21% undecided and only 11% stating that they would not.
There has been much discussion and debate in recent days about the risk to recruitment agencies posed by the Criminal Finance Act in circumstances where a contractor assessed as inside IR35 by the end hirer chooses to operate outside. This may be a legitimate concern in some circumstances; however, with the right processes in place, this risk can be managed.
What does the future hold for the flexible workforce?
In these unprecedented times, there is much uncertainty, however, one thing is clear; the UK needs its contingent workforce now more than ever and any move to make this easier for business is to be welcomed.
We have our own robust contingency plans in place and remain confident in our ability to continue to deliver our services uninterrupted.
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If you have any concerns, queries or would like to speak to a member of our team, please get in touch.