Contractors’ Questions: Is ‘inside IR35’ a risk for clients seeking niche skills in only the short-term?
Contractor’s Question: A number of short to medium-term contracts are being advertised for specialist skills but they are categorised ‘inside IR35’. If an end-client is advertising in this way, is this them effectively admitting ‘we have a role that we need filling, however we are not prepared to cover employee benefits or employers tax liabilities’?
Should the market really accept ‘caught by IR35’ contractors when it’s for specialised skills on a very short term basis? Surely we should only be seeing PAYE, FTC or outside IR35 roles when it’s a niche skillset for just a few months? Furthermore, could such end-users be putting themselves at risk in light of the recent Uber judgment?
Expert’s Answer: The thinking behind advertising a project as inside or outside IR35 is that it gives contractors an indication of where the client expects the engagement to lie, after having outlined the requirements for the assignment and the expected working practices.
Expected status Vs Actual status
That said, it shouldn’t be mistaken for an accurate representation of actual IR35 status. Advertising the expected IR35 position doesn’t negate the need for a formal and compliant IR35 assessment when the contractor is engaged either. As many contractors know, the work itself, responsibilities, processes, level of autonomy and the way in which a service is delivered in reality might not reflect what was initially outlined in the project description.
Almost needless to say, any changes to contractual terms or working practices can impact the actual IR35 status. It’s why, when supporting businesses, we encourage them to carry out a thorough review of the written contract, in addition to the working practices, which reflects the reality of the situation.
More scrutiny likely in wake of Uber ruling
To our way of thinking, contractors engaged inside IR35 should be offered employment rights. After all, they are paying tax as an employee. Following the landmark Uber Supreme Court decision in favour of its drivers, there is likely to be more scrutiny on the unfairness of expecting inside IR35 contractors to pay employment taxes and receive nothing in return.
In answer to the other part of your question (whether clients put themselves at risk when advertising inside IR35 roles), currently there’s nothing stopping a business from doing this. However, as you point out, it simply strengthens the case for the government to rethink the rules - something I imagine they’ll face growing pressure to do as a result of IR35 reform.
FTC to replace inside IR35?
Regardless, in the long run, I doubt firms will advertise roles they expect to sit inside IR35. Instead, I imagine many inside IR35 engagements will be replaced by Fixed Term Contracts (FTC). In my opinion, the reason we saw a number of them crop before the reform was because businesses were assessing existing role profiles ahead of the now-enforced changes.
The expert was Seb Maley, CEO of IR35 specialists and off-payroll rules advisory Qdos.