HMRC IR35 Reforms Extending into the Private Sector, are you prepared?

HMRC IR35 Reforms Extending to

Private Sector 2020.

In October 2018 it was announced that the IR35 reforms will be extended to the Private Sector. The draft legislation is expected Summer 2019, with implementation April 2020.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/752160/Off-payroll_working_in_the_private_sector_-_summary_of_responses.pdf

3.1 - The government announced at Budget 2018 that it intends to extend the reforms to the off-payroll rules. A further consultation on the detailed operation of the new rules will be published in the coming months. This consultation will inform the draft Finance Bill legislation, which is expected to be published in Summer 2019. The new rules will be given effect from 6 April 2020.

My recommendation to all my clients is;

Work with the entire supply to establish IR35 status as the fee payer is liable but the end hirer has a responsibility to make a decision.

If you believed that your contractors weren’t caught by IR35 for all these years, what’s changed? The only difference is that as the fee payer you are now liable

Ideally you and your end hirer will come to the conclusion that the roles are not caught by IR35

How do you and your end hirer make that decision – use experts like us, who can provide detailed individual assessments. This takes time so don’t leave it too late. NB Assessments need to continue to be regularly undertaken, this is not a one off task

Remember that the cost of contractors being deemed as caught will result in between 10-25% extra on cost, plus contractors will be significantly worse off typically circa 15%

Furthermore, contractors will demand employment rights if taxed as such

The other alternative is to switch contractors to FCSA accredited umbrella, saving the on-cost but hits the contractor in the pocket

Establish a PSL for umbrellas and consider uplift decision

Immediately;

Establish a steering group to review the position with key stake holders including end clients

Assess costs and risks

Understand legislation

Agree a strategy

Engage experts to undertake assessments – the CEST tool is biased, so best to utilise expert assessors

Consider Fee payer liability services such as NM protect

My experience of the Public Sector reforms;

Chaotic – with complete denial and slow adoption

Mass migration to aggressive tax schemes

Mass migration in to FCSA accredited umbrella – for those

Contractual changes – meaning that IR35 becomes irrelevant, ie enforcing use of umbrellas

Establishment of umbrella PSLs

Where gross payment is to be made to PSCs – the use of expert IR35 advisor assessments

Utilisation of fee payer liability services by agencies (like NMill Protect)

The use of the CEST tool is accepted as flawed, so most are utilising independent experts to undertake reviews

Lack of loyalty of contractors, just searching for agencies with the highest take home pay – so continued payment as PSCs

What can NumberMill do;

Help you and your end clients understand the financial implications to you, your client and the contractor

Analyse the workforce, identifying areas of risk

Undertake IR35 assessments and provide written reports – to handle high volumes we currently have an App in development as we have found our current process to be too slow