The IR35 reform deadline date of 6th April 2021 is fast approaching and with just a few months to go, it’s incredibly important that you know where your stand as an employer should you wish to maintain you contract workforce.
Will IR35 be delayed again?
Andy Vessey ATT, Kingsbridge’s Head of Tax and IR35 guru, comments “Businesses should not rely on the possibility that the government might further postpone the legislation for another year due to Covid; there are no noises coming out of the Treasury that the IR35 reforms are going to be delayed and therefore it is prudent that businesses forge ahead with their preparations.
According to the government, postponing the reforms in 2020/21 cost the Exchequer £1.9BN. Coupled with the fact that medium and large-sized businesses have had an additional year to get ready, and assuming that the vaccine programme is successful, the government’s view may well be that there is no good reason to further delay the reforms. Prepare now and avoid later panic when mistakes can be made.”
The message is clear: businesses need to plan now so that they are ready come April, and burying your head in the sand and hoping it might all go away is not a smart strategy.
What does this mean for employers?
Each contract engagement must be assessed, and a status determination produced which tells the worker their employment status for tax purposes and provides reasons for this determination.
The law says that you must take ‘reasonable care’ when making a determination. From April, the responsibility for producing status determinations lies with the employer if they are a medium or large-sized business in the private sector (it already applies to public sector clients).
For small companies, the responsibility for status determination stays with the intermediary (usually the worker’s limited company). It’s important to demonstrate that you’ve followed a process and have considered reasons for any determination. If a worker challenges your determination, it's important not to rely on blanket determinations (e.g. declaring all contractors inside IR35 just because that seems easier).
How do I prepare status determinations for IR35?
The government does provide its own tool, CEST, that claims to help you decide if off-payroll rules apply, but it can be inconclusive in a lot of cases. Similarly, there are accounting and legal consultancy firms that offer a bespoke service to assess contracts, but these can be time-intensive and costly, especially if you employ a lot of contract workers and hire frequently.
That’s why we've partnered with Kingsbridge to offer smart, hybrid solution status tool that offers the best of both worlds: an online questionnaire that can provide an indicative determination in minutes, combined with expert support to assess more complex cases or anything where you feel you’d like a second look.
The tool has been built to incorporate up-to-date case law as well as government guidance.
What should I be telling my contractors?
They need to get prepared too. Our top tips are:
- They should check all their contracts to ensure the wording makes it clear that they are a business operating independently to provide services and that this is not an employment relationship.
- They should examine their working practices. Signifiers of genuine self-employment shouldn’t just be written in the contact, they should be a reflection of how their relationships with clients like you work.
- They should discuss with their clients and recruitment agencies (if they use them) to highlight any changes to contracts or working practices, or simply to lay out their evidence.
Avoid delay and panic by acting now to get prepared for April. Then you can be assured that your all stages in your contractor supply chain are all ready to move smoothly into the new processes.
If you need support with your preparations, like staff training, legal advice or assessment of contracts, Bodhi’s complete IR35 solution can help ensure that there are no hiccups along the way. You can get in touch with our contract team by emailing firstname.lastname@example.org or calling is 0203 8548408 and we’ll talk you through how we can support you.