It’s difficult to talk about IR35 without stirring up a debate. For those of you who are not aware IR35 is all about what HMRC refers to as ‘off-payroll workers’ and the rest of us probably just call contractors. What it all boils down to is that contractors (at the moment only in public sector environments such as local councils) who fulfil a role within an organisation cannot be considered to function as an employee. It is with the decision about who is considered an employee that the problems start to occur. Northampton, like most cities in the has a business population that runs on both regularly employed workers and a substantial amount of contracted team members. That means when IR35 hits in April 2021 there are going to be a lot of people affected. Right now, we are all still coming to terms with the pandemic fall out, but that change is still coming and if you use contractors you need to ensure your business is ready for it. It is unlikely that it will not be implemented as it was due in April 2020 and was delayed due to the Covid outbreak.
There are various things that will signify that someone is outside the rules of IR35 such as who sets working hours, the ability to supply a substitute worker, and so forth. IR35 has actually been around for many years but there were changes made in 2017 that put the onus of whether someone was employed or not on the person issuing the contract. At first this was only applicable to public service areas where it caused a great deal of consternation. The issue was that the rules involved with enforcing IR35 were deemed by many to be convoluted and difficult to implement. Imaging how much more difficult things may be when the same rules are implemented in the wide variety of businesses in the private sector. Many mid to large businesses use specialised contractors for extended periods and seasonal workers, temporary workers and so on could all need to pass muster for IR35.
70 New Questions
In the last round of review, the government released a document detailing 70 (yes, 70) questions intended to clarify where and how IR35 will apply. As with many of our accountancy colleagues, we are concerned that IR35 is unwieldy, difficult to impose, and occasionally rather arbitrary in implementation. In fact, it is the implementation that is at the core of this. Concerns over accidental infringement and the threat of some pretty dire consequences if you do, seem to indicate a worrying lack of clarity.
Initially this only applies to the mid range and larger business concerns and it expected that this will be determined by whether the business needs to have an audit. If they do not apply, then the contractor themselves still decides if they are compliant not the business owner.
Opinion on these rules ranges from the view that they are needed to close a tax loophole and encourage full time employment through to the standpoint that they are a cynical tax grab by the government. Whatever your opinion though, you need to be sure you are right about your IR35 compliance or whether you are an employer or a contractor, you could be in some serious financial hot water.
We are here to help and if you use contractors (or are a contractor) it’s a good idea to get in touch to discuss any financial implications. As of writing this article you only have a few months to think about your employment policy and how you will deal with the coming change if it affects you.
There is more information below, and we will keep you updated where we can but our advice at the moment is to understand IR35 as much as practical and come and see us about tax implication as this becomes law. We also suggest speaking to an HR specialist to ensure your compliance in the matter.
Ironically, they will probably be a contractor.