IR35 Reforms – Key lessons learned

Since the introduction of the IR35 reforms to the private sector in April this year, Workr Compliance has been working closely with contractors, engagers and agencies to meet the new legislative requirements.

The fundamental changes in responsibilities brought about by the reforms have presented some significant challenges to the temporary labour supply chain. In recent articles, we have highlighted the risks associated with the blanket statement approach that many engagers appear to have taken.

We’ve also analysed how IR35 insurance policies, in support of a robust compliance and assessment process, might help reduce or even remove the risk of engaging contractors on an “outside IR35” basis.

And, we’ve assessed how the IR35 reforms have created a divide between project and hiring managers, desperate to retain or attract highly skilled specialist contractors and risk-averse legal and HR departments, keen to avoid the repercussions of HMRC investigations and IR35 assessment challenges.

So what have we learned in the first four months following the introduction of the IR35 reforms?

IR35 or not, the world keeps turning

First and foremost, the world hasn’t stopped turning. Businesses are continuing to trade and hire, and the need for a skilled and flexible workforce has not gone away.

On the contrary, in fact.

As the global economy emerges from the difficulties of the last 18 months, the outlook appears bright.

Investment levels are on the rise, and the economy is showing signs of a quick recovery. These signs are breeding confidence in the marketplace, and recruitment activity, including temporary labour, is expanding at record rates. According to the REC’s report on Jobs for June, “temp billings growth hit its highest for nearly 23 years”.

So what can engagers do to make the most of this resurgence whilst remaining compliant to the Off-payroll legislation?

IR35 Reforms – Lessons learned

It’s not too late.

Case studies in the public sector are now demonstrating HMRC’s approach to poor IR35 reform preparation and care.

The Home Office and DWP have both recently been issued with significant bills from HMRC as a result of carelessness and errors in their handling of the reforms.

It’s now almost five months since the IR35 reforms took effect but with HMRCs soft landing approach, it’s not too late to implement or improve processes to meet the off-payroll legislation.

Effective planning and collaboration in the supply chain

Our experiences over the last few months have shown us that those engagers that have “gone it alone” without engaging with their supply chain partners have experienced severe difficulties in getting the assessment program up and running effectively.

In many cases, suppliers have had to repeatedly return to engagers for clarification and guidance on how assessments have been conducted and concluded. Subsequently, we have observed far higher rates of challenges where engagers have not planned and collaborated with suppliers on how to achieve a valid status determination.

For further information on valid Status Determination Statements, see HMRC’s Employment Status Manual (ESM10013).

Compliance is an ongoing process.

One of the biggest issues that we have observed since the introduction of the reforms is the failure of engagers to plan for their IR35 responsibilities as part of their ongoing business processes.

Planning for, and responding to the introduction of the reforms only met the requirements of the legislation for engagers and contractors on assignment at that point in time.

We are now seeing engagers struggling with talent retention and attraction because they haven’t integrated their IR35 responsibilities into their recruitment and attraction frameworks.

For engagers to remain competitive and compliant in the contractor marketplace, IR35 compliance must form part of the ongoing “business as usual” process. 

IR35 – Business As Usual

Businesses should not underestimate the benefits of having a defined, robust and documented process for IR35 assessment.

Engagers prepared to invest in some simple processes and procedures, along with the support of compliant suppliers, can quickly and easily mitigate the risks posed by the new legislation and meet HMRC’s requirements.

At Workr Compliance we encourage anyone responsible for IR35 compliance to ensure that your determination process is fit for purpose and meets HMRC’s reasonable care requirements.

Although the IR35 changes are now in effect, it’s not too late to take action.

To help meet your reasonable care responsibilities concerning IR35 compliance, our specialist team at Workr Compliance can provide impartial advice and support.

For a free, no-obligation audit and assessment of your IR35 compliance process, you can speak directly with Andy Webster, Founder and Director, Workr Compliance, on 07827 810851 or at aw@workrgroup.com.

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