Time is running out...are you ready for IR35?
An interview with Fiona Tyler, Finance Transformation Specialist
The new IR35 legislation has gained a reputation for being complicated, and with over 60,000 searches on Google in the UK per month, there’s plenty of people still looking for clarity on what the new legislation means for them. With the legislation implementation looming, we interviewed transformation specialist and IR35 expert, Fiona Tyler to help you cut through the IR35 jargon.
What is IR35 and how it will affect companies hiring contractors?
In the autumn budget statement last year, the Government announced that it would be extending its Off Payroll Working Rules, commonly referred to as ‘IR35 reform’, to medium and large businesses in the private sector.
This means that for “end hirers”, there will be several new obligations to follow. One key change for the “end hirer” will be they gain the responsibility for determining the IR35 status of individuals delivering their services via an intermediary, such as a limited company. All roles in scope of the reform will need to be assessed and provide the relevant individuals with a ‘status determination statement’ (SDS) which confirms whether they are impacted by IR35 or not. Previously this was the responsibility of the contractor not the “end hirer”. This reform comes into effect on 6 April 2020.
What is the IR35 test?
The IR35 test assesses whether a contractor is inside or outside the legislation and therefore whether or not they should be payrolled. There are a number of tools that can help with this assessment including CEST, an assessment service provided by HMRC. This looks at a number of criteria;
- the worker’s responsibilities
- who decides what work needs doing
- who decides when, where and how the work’s done
- how the worker will be paid
- if the engagement includes any benefits or reimbursement for expenses
What do you see as the biggest impact the legislation will have?
Initially, I think that companies hiring contractors will take a very risk averse approach and stop engaging day rate contractors/interims and move business critical roles onto the payroll. I believe they will look to be “super” compliant, as otherwise post April 2020 they will be open to investigation by HMRC, which in turn could lead to looking back to prior years and probably no one wants to go there!
What options do contractors have if they contest the hiring company’s decision regarding their status?
As the responsibility for the assessment, rightly or wrongly, falls to the hiring company, they are unlikely to accept any challenge from the contractor. The only way forward would be to ensure that the engagement falls entirely outside of IR35 regulations, for example, a statement of work with payment made on specific project deliverables. That will require a completely different way of working.
Will this impact how jobs are advertised in future?
I think roles will be specifically advertised as Fixed Term Contracts or as secondments from consultancy organisations that are employing those individuals. This might change over time as both interims and hiring companies get used to the IR35 regulations but don’t forget the IR35 assessment has to take place regularly. Probably, at least annually even on an existing assignment.
What tools and information sources are available to help me stay compliant?
There are all sorts of tools and information out there. A number of large financial organisations have already come out with their policy on contractors and I am sure that others will announce as we get closer to the 2020. Clearly, to be sure you need to check the HMRC tools and guidance but the Big Four all offer services as well as all the resourcing companies.