What are the 10 most irksome things about the forthcoming IR35 reforms? When it comes to preparing for the IR35 reforms in the private and charity sectors next April, the prize for the greatest hassle has several contenders. Allow me to introduce you to 10 of them over this and a few further blogs.
I know it probably seems really, really boring, but it’s important to be ready. What we learned from the roll-out of the same rules in the public sector is that there is no way you can wait until March 2020 before you do anything. You need to be preparing now!
Number 1 most irksome
I think no. 1 has got to be that every single contractor will need to have their particular personal circumstances assessed individually by their employer. They will need to be closely interviewed and the terms of their contractual relationship and the factual situation of their work analysed.
If you have several contractors working for you, this could take some time. (In fact, are you absolutely sure precisely how many contractors you have?)
When assessing each contractor, their ‘employer’ (end user) will need to consider the particular personal circumstances of the contractor, such as what they are doing for the business, what other work they may be doing in addition, what the terms are of their PSC’s contract with the end user, how much control they operate under, how they do their work, where they do their work, how they charge for it, etc. etc.
You could have two apparently identical contractors, but one may have special personal circumstances that you don’t even yet know about that could make all the difference as to whether they do or don’t comply with IR35. All the responsibility to find this out and assess it will be on the end user.
Number 2 most irksome
No. 2 pain in the backside is probably that previous approval by HMRC for someone being compliant with IR35 is irrelevant to the new duty to assess them again. It would be so nice if previous approval could be relied upon – why on earth not?
The short answer is probably that IR35, which was originally introduced in 2000, has generally been a massive failure, and so the intention is to go back to square one with every contractor once their end user clients take responsibility for being the IR35 police officer/tax collector.
Number 3 still really irksome
For no. 3 I’m going to offer up the fact that every employer/end user is going to need to set up an IR35 appeals process. Each contractor who is assessed as not being compliant with IR35 and therefore must have tax and NI deducted at source from their fees will have the right to appeal against that to the end user. My guess is that most contractors who are faced with the pain of extra tax are going to have a pop at an appeal.
You are likely to receive long, complex letters from the contractors’ tax advisers, accountants and solicitors. The contractors themselves may be really passionate about arguing legal interpretations. Which of your lucky senior managers is going to draw the short straw and hear these appeals? (Try to ensure you’re away on holiday that week/month/year.)
The remaining top 10…
If you can bear any more, I will share the rest of my top 10 in future blogs. Who said tax couldn’t be fun?
If you’re facing the pain of the IR35 reforms and could do with some advice, support, a sounding board, a fresh pair of eyes or simply a hug, do please get in touch with me .
Email Luke or call 0117 325 0921