Only more covid fallout can keep IR35 reform from biting contractors in April
Last week’s vote by MPs to go ahead with IR35 reform in the private sector from April 2021 requires an action of their own from contractors, agencies and clients – a stepping back to see what is on the table, writes Kate Cottrell, co-founder of IR35 specialists Bauer & Cottrell.
Rightly or wrongly, the government has been absolutely determined from day one to push these reforms to the off-payroll rules through, so, in that sense, nothing has changed, and everything is now set for implementation from April 2021.
A further delay?
The only thing that will stop these reforms from going ahead in 10 months’ time is connected to the dreadful Covid-19 pandemic, and if -- and it is a big IF; if there is no take up of contracts for Personal Service Companies. In that case, there could be a further delay, and we have already seen that anything related to coronavirus can be legislated for at breakneck speed. That said, there is no point in anyone waiting to see what happens in this regard, so all should be preparing now.
When it does come into force, there will be the same chaos as we saw in the public sector. The chaos will likely emanate from a lack of understanding of IR35 and what their responsibilities are. To get to grips with those, I would refer all parties to HMRC’s guidance (draft) on taking “reasonable care.”
More than just a CEST play about required
I would urge everyone to read this guidance. To be free from risk, engagers are going to have to prove that they have taken reasonable care throughout the engagement – not just before it starts. This is not just about someone in HR playing with HMRC’s CEST tool or indeed any tool. And yes, tools can assist but a comprehensive production of a Status Determination Statement involves:
- A review of the written contract; and;
- A proper analysis of the PSC’s business features and history, and of most importance;
- An analysis of the reality of the day-to-day working practices (with input from an engager’s representative qualified to comment on the same practices).
At the House of Lords Economic Affairs Committee inquiry, we heard of eye-watering amounts of money spent by the NHS and others preparing for these reforms.
Well, engagers need to have a record of at least having access to IR35 specialists to help with the difficult cases.
Life-changing (as an upturn takes shape)
And by ‘IR35 specialist,’ I am not referring to a sales teams promoting an in-house tool, but to those with genuine IR35 experience of reviewing contracts and defending cases. For all those shouting ‘I would say that,’ given that we are firm fully involved in IR35 for over 20 years, contractors and others affected will need to ask themselves; who would you choose to rely on with such vast, life-changing sums at stake?
As to those whose lives I’m referring to, we are pleased to report that we are now beginning to see our contractor clients pick up contracts, as this upturn starts to mature. That’s one thing many will be pleased to notice as part of our recommended stepping back to see what’s on the table.