The Conservatives have “pledged” to review IR35 tax reforms due to be rolled out to the private sector if they remain in power, bringing their policy into line with those of the other major parties contesting the general election.
This news could mean the introduction of private sector IR35 next April may be delayed and even significantly amended. But while that has been welcomed by some business groups, legal experts say businesses would be “foolish” to halt preparations for a 2020 roll-out.
Speaking on Radio 4’s Money Box show, chancellor Sajid Javid said his party would look again at the rules to “make sure that the proposed changes are right to take forward”.
But what this really means we will only know if/when the current government stays in power or is replaced.
How do I determine whether a worker is inside or outside of IR35?
Determining whether IR35 applies to a contract worker is a complex matter. There are three key principles that will determine your IR35 status:
- Supervision, Direction, and Control: What degree of supervision, direction and control do you have over what, how, when and where the contract worker completes the contract and day to day work?
- Substitution: Is the contract worker required to carry out the work themselves, or can they send someone in their place?
- Mutuality of obligation: Are you obliged to offer the contract worker work, and are they obliged to accept it?
There are other principles, however, these three key ones would be a good overarching initial test.
So what should we be doing?
If you have not performed an IR35 Audit, it would be prudent to do so. If you have, then you may have already decided which roles constitute an “in office” position, therefore deeming them inside IR35 and which roles are temporary or project related and therefore potentially outside of IR35.
You may have also tested these scenarios using the government CEST tool, with varying outcomes. It is worth noting that if these tests were carried out prior to November this year they will need to be retested, as HRMC has reformed the tool.
Around 30 questions have been updated or added to the tool to offer a more accurate determination of whether a worker falls within the remit of the off-payroll working rules. However, many critics have said there were still concerns about the tool’s accuracy.
There have been recent cases lost by HMRC due to the inaccuracy of the tool, particularly when it refers to MOO (Mutuality of Obligation).
Two of these cases are detailed below:
Should I just release contractors in April?
Only your company can make this decision, however, there are several critical factors to consider:
- Have you considered your current working relationships with your workers and do these relationships have the potential to change to fall inline with IR35 regulations, if they are currently questionable?
- Is your company happy to work within the frameworks of IR35 and if so, to what end?
- Which of the existing workers do you considered to be operating within IR35 and is it possible to renegotiate their terms?
- Have you communicated these thoughts to the existing workers and discussed potential outcomes?
- Do these workers hold critical skills and/or knowledge to the successful outcome of a deliverable?
- Are you able to convert some of these key workers into Permanent Employees?
- Are the current skills being presented by these workers available from other sources? If so, from where and at what cost?
- Do your current recruitment agencies truly understand IR35 and are they reflecting this in their contracts and processes?
- Do your current agencies support Umbrella or PAYE workers?
Based on the outcome of these many discussions and analysis you will be able to formulate a plan of action. It would be recommended that you review and discuss these options with your recruitment partners and agencies.
How can Vertex IT Solutions help?
Having been heavily involved in IR35 legislation since 2000, we have a wealth of experience on this subject. We have also been investing heavily in preparation for April 2020 and the potential outcomes of the General Election. We have all bases covered and the contracts/systems and process to cater for all outside and inside IR35 workers.
We would be happy to discuss how we can support your business or even if you had a general question. If this is the case please contact us by filling out the form below and we will be in-touch.
More updates will follow in due course. Until then, we wish you a very Happy Christmas and a prosperous New Year.