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IR35 - Recruiters Respond to HMRC Updates

28 January 2020

By James Fernandes

IR35 - Recruiters Respond to HMRC Updates

​The latest IR35 amends will give HMRC the right to seek unpaid tax and NI from incorrectly categorised contractors from the end-client - if an intermediary agency is unable to pay. Whilst this in theory offers some comfort and protection to agencies concerned mistakes could force financial ruin, some larger recruiters are concerned that small agencies could profit from non-compliance safe in the knowledge the end client is ultimately financially liable.

At Carrington West we have been operating pursuant to IR35 with our public sector clients for some time. Carrington West’s MD, James Fernandes says of the latest amends,

“Non-compliance has never been an option and serves no benefit to us, our contractors or our clients. It is far more likely that the end-clients will look to mitigate any risk of liability by tightening their talent supply chain, ensuring measures are put into place before they use our services. The result will be to force recruiters to supply evidence that they are accurately following the regulations when signing up contractors.”

This certainly seems to have been the case in Carrington West’s experience with public sector clients over the past three years. After an initial period of adjustment, James reflects,

“When IR35 was introduced for public sector contractors in 2017, it was widely reported that there was a mass exodus of contract workers looking for work elsewhere. It was true that many of our risk adverse public sector clients knee jerked by making blanket decisions to not engage contractors at all. However, the potential resultant lack of supply of talent to complete vital infrastructure projects meant for many this was not a sustainable model going forward. What we have seen to some extent, is major organisations switch to a more sustainable individual assessment model.

Perhaps most importantly, processes have been put in place that require assessments to be as accurate and rigorous as possible and contracts are negotiated to ensure that a worker falls outside of IR35 where there is a genuine need for that role to be fulfilled by a contractor.”

Whatever amendments are made over the coming weeks leading up to April 2020, IR35 is here to stay. Carrington West’s experience in the public sector has placed us in the unique position of already having the expertise and capabilities to guide contractors and clients through the changes and build a robust framework that mitigates risk whilst maximises access to much needed talent in the built environment sector.

James concludes by noting,

“Any recruiter that puts their head in the sand over IR35 is being very short sighted. The temporary and contract work force in all sectors in increasing as many people chose to work in more flexible or varied roles. By not being on board with IR35 or any future regulations that are bound to be introduced, recruiters will find themselves outside of the supply chain.”

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