Contractor sector considers IR35 technical detail of Budget 2021

Parties in the contractual chain will need to inform their clients if a worker has a ‘material interest’ in the intermediary they work via, under new off-payroll rule duties from April 6th.

If the information is not provided to the final end-user, then such “clients must assume conditions of liability are met, and issue an appropriate Status Determination Statement.”

Issued by Chartergates, this is among the guidance that advisories are drawing up based on HMRC’s paper ‘Technical changes to make sure off-payroll legislation works as intended.’

'Wording will be key'

Related to HMRC tweaking the legislation to ensure workers with no interest at all in the intermediary are not within scope, the law firm’s note says the tweak should do the job.

“We currently await the actual wording of the legislation -- which of course will be key -- but on review of HMRC’s intention, the…[amendment should] address the issues”.

“[So] if the worker holds no interest at all in the intermediary,” Chartergates continued in an email update, “it would appear, the arrangements will fall outside of the scope”.

'No information means issue SDS'

But the firm then advised: “Parties lower down in the contractual chain will need to provide additional information to their clients to confirm whether workers hold a ‘material interest’ [defined as a shareholding of less than or equal to 5%].

“If this information is not provided, clients must assume COL [Conditions Of Liability] are met, and issue an appropriate SDS [Status Determination Statement].”

The same is true in the public sector, as where ‘material interest’ information is not provided to the end-user (by the worker), the end-user must assume a material interest and consider the April 2017 legislation.

'Time-constraints'

Speaking last week in the Budget policy paper, HMRC acknowledged that “there was no formal consultation on the technical changes” (there are four in total), due to “time constraints.”

But a HMRC spokesman says none of the technical changes, or IR35 guidance updates alongside Budget 2021, “will affect engagements that were already in scope of the rules.”

In a second Chartergates update however, and relating to HMRC’s off-payroll enforcement paper before the Budget, the firm says the guidance could come into play on wrong decisions.

'Useful in a dispute'

“One of the key aspects to note, is that a penalty won’t be charged where ‘reasonable care’ was taken to apply the rules,” the second update says, referring to the February 15th paper.

It adds: “Thus [the suggestion is] that where an end-client incorrectly determines the outcome on a SDS, for example, they should not expect to be charged a penalty.

“A point of note – whilst this is only guidance, it may be useful in a dispute where a purported inaccurate SDS is issued.”

'Significant burden'

Similarly, ‘useful’ is about as positive a reaction as the Association of Professional Staffing Companies has given to the IR35 legislation’s four technical changes.

APSCo said: “The looming roll out of off-payroll into the private sector and the implementation of changes into the public sector will…place significant burden on staffing companies and the contractor community.

“And while the clarification in the draft Finance Bill and HMRC guidance…regarding the definition of an intermediary, and where the risk lies should a client subcontract an SDS addresses some of the concerns raised…,it doesn’t change the impact recruitment businesses and contractors will face next month.”

'A mockery of the whole fiasco'

Sounding like-minded is Qdos operations director Nicole Slowey, who believes Budget 2021 was a “clear opportunity to postpone IR35 reform in the private sector.”

But responding online, oil and gas recruiter Louise Wood said: “Let’s be honest -- any further delays to the reform would have made a mockery of the whole fiasco.”

At umbrella company Orca Pay, boss Robert Sharp suggests it looks more of a shambles for the chancellor to not even acknowledge IR35, as his speech and Red Book failed to.

'Damp squib'

“Rishi Sunak said, ‘We will build a fairer and more just country,’” the umbrella boss said, quoting the chancellor.

“[Yet] off-payroll reform [is] ploughing ahead…despite repeated calls for this piece of reform to be delayed or postponed. It was not even mentioned.

Addressing Mr Sunak directly, Mr Sharp said: “Perhaps it may genuinely be beneficial to take your head out of [the sand] before making statements on building a fairer and more just country.

“[Your] Budget was nothing but a damp squib for our sector. The very sector that is going to play a huge role in helping our economy bounce back. Disregarded, forgotten, and for some people, left to rot by this government. ‘Fair’? Please.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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