Even a top IT contractor recruitment agency like us needs your help to get IR35 reform-ready

It’s hard to remain credible when your actions repeatedly contradict prior commitments.

From the advanced pages of the business playbook, this tenet is not. Nonetheless, it’s something HMRC is failing to grasp with IR35, frustrating recruiters like us and just about everyone else we do business with, writes Colin Morley, director of Harvey Nash plc.

Earlier this year, HMRC assured businesses and contractors that it would not take a targeted approach to enforcement of IR35. The Revenue has also said, in relation to upcoming changes to IR35 in the private sector, that it would ‘not be targeting historic cases.’

The GlaxoSmithKline case clearly shows that HMRC has broken both of these commitments.

A new approach to IR35 enforcement?

It is becoming increasingly apparent that the taxman’s new approach to enforcing the regulation involves little more than identifying big businesses in sectors heavily reliant on contractors, and issuing blanket notices to all potential targets.

Like a ram butting its head against a wall, HMRC seems determined to charge ahead with this targeted strategy, regardless of the harm it inflicts upon itself. With its poor tribunal record of eight IR35 losses and just one win, it could be that HMRC will end up with even more egg on its face than it got from its disastrous campaign against the BBC.

This is why -- more and more, and despite claims that industry is looking to the tax office for guidance, it must come down to the private sector to get its own house in order without reliance on the Revenue.

How our 350 contractor engagers are responding to IR35 reform

So it’s reassuring that out of the over 350 contractor end-clients we invoice in the UK , the vast majority are putting in place IR35 actions plans. They are understanding who their contractors are and how they are engaged. They are also using this as an opportunity to make sure they are adhering to all UK legislation -- the MSC rules and Criminal Finance Act for example.

This majority are looking, right now, at the working practices of their contractors and what would happen, in practice, if there was a client-led disagreement process put in place. The conversations taking place involve IR35 keywords like ‘reasonable care’ and ‘best practice,’ notably where clients are in dialogue with their contractors to clarify their position as inside IR35, or outside IR35, based on a variety of factors, notably Substitution. Where substitution clauses, among others implying a business to business relationship are in play, there is determination to ensure the relationship is clearly one of client and contractor, not master and servant, As to those end-users who aren’t engaging with us, they simply say they’re looking into private sector IR35 reform themselves, and don’t require any outside input at this time.

Enough of them. How about you?

But just because the vast majority of end-users are taking steps to get IR35 reform-ready, or at least heading in the right direction, it doesn’t mean the vast majority of contractors are ready to go too. Are you, right now, fully prepared for an IR35 Status Determination Statements? Your likely answer from what we are seeing at the coalface? Probably not.

Remember, if you’re a UK limited company contractor providing services to a company (and even if that company is ‘small’), the chances are you are now at potential risk of falling under IR35. Perhaps your client has, by and large, treated you as just another of their employees in all but name. Maybe they know they can’t boss you about but don’t know they may have to accept a substitute just because it’s contractual? Or perhaps they’re ok with substitution, and you having other clients, but insist that they control your place and hours of work.

These are all valuable snippets, suggestions and signs we’re picking up (albeit slightly tweaked here to spare any blushes), from our just-opened 2019 survey. And we want you; no need you to participate too. If we are to succeed in putting our house in order, and by extension, the houses of the bulk of our hundreds of clients who are communicating with us to get things right in time for April 6th, without overly depending on HMRC, I urge you to fill it in -- Harvey Nash’s IR35 reform survey. All responses are confidential and only aggregated data will be published. No questions are mandatory.

In return for your time, here’s three important tips to help get you and your limited company and its contractual partners IR35 reform-ready:

1. Don’t Scaremonger

From rhetoric surrounding ‘pro’ and ‘anti’ contractor approaches to private sector IR35 reform from some of the country’s largest organisations, to HMRC’s continual drive to fight contractors in court, both the contracting community and the firms they work with have a lot of uncertainty and ambiguity to tackle. Resist adding to it unnecessarily. Only the coolest heads will prevail.

Keep sight of the fact that, no matter what happens or what is said, if your client does not prepare your contract for IR35 changing in seven months, you may well end up out of pocket, financially, as a result of wrong decisions.  

2. Don’t assume someone else (client/agency/accountant) is sorting it all

Companies remain unsure and unaware of the entire consequences poor preparation might lead to ahead of the IR35 reform deadline. Like public sector implementation, the administrative burdens that will be placed on companies may well result in you facing worst-case scenarios.

Beginning dialogue with the companies you work with is paramount. Make them aware of what is happening; how it could affect you and your services if not actioned upon and offering guidance as to what you need from them is the way forward.

We encourage you to place small but constructive pressure on companies to make them act. Them having more of their ducks in a row, potentially thanks to your persistence and polite but firm prompts, will steer clients towards meaningful IR35 decision-making. Do not wait around for businesses to begin their preparation. Do your bit to make it happen.

3. Don’t accept permie-style actions/language from your engager  

It is crucial that you do not let your clients treat you as anything less than a business. Contractors are a steely bunch, but what we are seeing right now is that many businesses introduce elements that would be familiar to an employee, but are frankly wrong behaviour for a contractor.

Those businesses often turn to contractors to fulfil specialist skill needs yet neglect the fact that this should be a different relationship entirely to that of an employee. Your alarm bells should be ringing if the end-user:

  • Holds contractor ‘interviews,’ for IR35 or another reason/topic.
  • Introduces branded uniform, or other workplace attire for contractors to wear.
  • Holds a ‘one-to-one’ catch-up, session, appraisal or review.  

Language and actions like those outlined above can have a detrimental impact on your status as a contractor, if you are determined to be within IR35.

Do as much now as possible to rectify this, creating a collaborative and productive dialogue with your client to make them aware of why such actions are poor practice – for you and your business -- and what it could mean for both their business and yours, in the aftermath of a reformed IR35 from next April.  

And yes, we know it ain’t easy

From keeping track of invoices and submitting them on time, to client briefs or timescales, tax returns, rate negotiation and insurance, the life of a contractor is busy, to say the least. Add in the challenges that you now face with a fast-approaching IR35 deadline, and it can all become a bit overwhelming.

It doesn’t need to be so full on, or solitary, of course  By opening up a conversation with your client(s), you can air your concerns (a problem shared in the IR35 space is often a problem halved), and get it off your chest. Practically, you’ll have taken action and best prepared both your business and your contractual partners’ businesses.

But open yourselves up for a conversation with us, a leading agency, too, doing its utmost to get IR35 reform-ready. Click here to share your thoughts on IR35 and how it’s impacted you by completing our survey. We’ll send you a copy of the report when it’s published at the start of October.

The burdens placed on all parties have been well-communicated by now -- it’s time you act and benefit later, both for your own business as a contractor and for those companies that you work with.

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Written by Colin Morley

Colin Morley is a Director at Harvey Nash Plc. Harvey Nash Recruitment Solutions, providing a full spectrum of workforce solutions to our clients, from managing contingent workers to managing entire project and programmes across the UK, Europe, America and Asia.

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