Contractors, is your client one of the few ahead of the IR35 reform game?

It’s refreshing to see a big-name contractor recruitment agency like Hays speak today to ContractorUK readers about IR35 reform in the public sector ahead of its proposed rollout to the private sector.

But unfortunately at this not exactly early stage in the game, they seem to be one of the few agencies to be taking a forward-thinking approach to 2020’s IR35 changes, writes Seb Maley, CEO of Qdos Contractor.

In fact, despite us currently working with more than 50 agencies on the IR35-front, it has to be said that judging by our most recent study into more than 1,000 contractors, the recruitment sector still needs to step up its game to be ready for IR35 reform next April.

Agencies and clients yet to reach out

In particular, a massive 92% of contractors have not yet been contacted by their recruitment agency (or end-client) to discuss next year’s changes to the Intermediaries legislation. With less than a year to go until the responsibility for determining IR35 status transfers from the worker to the end-client, with the agency also involved, contractors need reassurance -- reassurance that when April 2020 arrives, they will not automatically be deemed inside IR35 by end-clients.

After the problems that the public sector has faced in dealing with the IR35 changes, contractors have every right to be concerned about the extension of the reforms. Therefore, it’s in the best interests of recruitment agencies and end-clients to communicate with independent, PSC-using workers. It will serve to the benefit of these parties if contractors have confidence they will have their IR35 status assessed fairly. This is a point that we are making loud and clear to agencies, and medium and large clients (‘small companies are exempt from the incoming IR35 framework).

Contractors poised to challenge IR35 decisions

But if fairness gets flouted, and contractors feel they have been incorrectly placed inside IR35, the overwhelming majority will challenge this decision. Specifically, more than eight in 10 limited company contractors said they would put up a fight, not simply walk away from their contract.

If the fact that blanket determinations are not compliant isn’t enough to stop end-clients from making them, a strong indication that contractors will dispute these determinations should be. It almost goes without saying that this would place a huge burden on the companies responsible for making uninformed status decisions.

Lack of confidence in the private sector’s IR35 readiness

Given very few contractors have heard from their clients or agencies, these individuals have little confidence that the private sector will be ready for IR35 reform. Only 14% told us they have faith in their client and agency to contribute to accurate IR35 assessments when the rules change. Around one in three are undecided, while the majority (52%) are not convinced that these parties will be in a position to administer IR35 fairly.

The work we are carrying out with businesses suggests that a number of companies are well underway with their preparations -- perhaps even ahead of the game. And while this statement might come as a surprise to contractors, I do have faith that in time, the private sector will be in a position to manage reform.

But that’s not to say there aren’t challenging times ahead. A lot of work still must be done to send a message to all medium and large companies that IR35 is an issue that needs to be taken seriously.

HMRC must take this into account

These findings come at a time when HMRC is preparing the draft legislation for next year’s changes -- and we included this insight in our response to the private sector IR35 reform consultation. Above all else, lack of communication and distrust among contractors that engagers will set status accurately highlights the need for HMRC to improve the guidance and support that it offers the private sector.

Moreover, according to the latest IR35 Forum minutes, a concern among participants was expressed at the meeting that “many” private sector outfits weren’t even aware of the incoming reform. While advisers and others in the industry are working hard to raise awareness about next year’s changes, HMRC also has a responsibility to properly educate the thousands of companies that will soon become responsible for administering IR35, so the Revenue too must up its game to give all parties affected by the 2020 changes a fair chance to play by the rules.

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Written by Seb Maley

Seb Maley is an IR35 expert, regularly commenting in national media on the topic. He is CEO of Qdos Contractor, a leading IR35 advisor and IR35 insurance company.
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