Three Months To Go Until IR35 – Are You Ready?
The IR35 reform is only three months away and many are still ignoring the elephant in the room.
For contractors, deemed in scope for IR35 purposes, the reform could mean that come April you will be placed under PAYE. For end clients and agencies, you could find yourselves either suddenly paying employee costs (PAYE and National Insurance Contributions) or suffering the ire of HMRC if a contractor of yours or a role is deemed in scope for IR35 purposes (whilst not demonstrating that due process has been met to support ‘reasonable care’).
But, do you know your responsibilities? And, are you sure you’re protecting your own interests? Here, we detail how you can start laying the foundations for a successful transition today…
Risk assess your situation
The first step for any party is to review your current circumstances and identify how you will be affected by the new rules. Businesses (end clients) should carry out a full analysis of their roles and contractors, determining who is and isn’t deemed inside IR35. Appropriate evidence should be retained to support decisions made and, in readiness, for inevitable HMRC enforcement.
Agencies placing contractor freelancers should check individual employment statuses and role status. A key driver for this is to help retain as much talent as possible in a compliant manner. It’s likely that engagers of contractors will consider terminating contracts in favour of a payroll-based relationship. This will impact the take-home pay of contractors and potentially turn them towards clients willing to review each contract on a case-by-case basis.
If you foresee any contractors falling inside IR35 legislation, it’s important to start communicating your intentions now.
Confirm your arrangements
Businesses should be confident and pragmatic, clarifying their stance immediately, offering an alternative where possible. Otherwise, there is a risk that bridges could be burned with both talent and agencies, as the latter will soon be required to confirm whether or not the client’s determination was correct.
If the contractor is found inside, the agency (if used) will be responsible for deducting the relevant tax and NICs at source. Therefore, it benefits all parties to know the intentions of each other ahead of time to prevent unexpected costs and help retain key hires.
Consider the possibility of securing a Confirmation of Arrangements (CoA) document. CoAs confirm the roles of each party in the supply chain. Contractors who can encourage their clients to sign today, would be less likely to have their IR35 status changed come 6th April.
Simplify it through an umbrella organisation
Many are still in the dark when it comes to IR35 and how it will affect them. But the right advice and guidance can not only support you, but ensure you are protected from the get-go. One such area that businesses, agencies and contractors are seeking advice on is alternative pay options to minimise risk and disruption post April 2020.
A solution is compliant umbrella companies. Umbrella companies are payroll service providers that handle PAYE and NIC contributions in line with HMRC on behalf of contractors and clients. Contractor freelancers are employed by the umbrella company, and benefit from full statutory employment rights and access to a suite of employee wellbeing benefits.
Removing all the hassle from the hiring process, umbrella organisations ensure compliance for both agencies and businesses by deducting PAYE and NICs (where relevant) on their end.
If you’d be interested in safeguarding yourself against IR35 reform, Workr are here to help. Not only do we offer our own award-winning umbrella organisation, but we can also support end clients and agencies to navigate the proposed changes and help them get ready for April via Workr Compliance.
Want to know how the reform will affect you? Ready to take the next steps? Simply contact our team on IR35support@workrgroup.com.