The IR35 Off-Payroll Tax that was due to be rolled out in the private sector in April this year but was delayed until 2021 in the wake of the Covid-19 pandemic. Attempts to postpone further to the 2023-2024 tax year were thwarted a couple of weeks ago, despite several areas of concern including fears that many vulnerable workers could be pushed into zero-rights employment and that the tax yield may not be as high as expected as organisations make blanket assessments or offshore services.
Where does that leave contractors? Many could be forgiven for thinking that there is a high chance there could still be further delays and may think spending time and resources at this time is unnecessary. However, IR35 has not changed since its inception and where the liabilities lie will shift at some point, so during the pandemic, when many people are working from home, is a good opportunity to consolidate your position or update or change practices that are being forced upon you.
James Fernandes, Carrington West MD advises contractors to be proactive now.
“IR35 isn’t itself actually changing and therefore you are already “inside” or “outside” IR35, but if you have yet to gain a SDS [Status Determination Statement] our advice is to focus on collecting evidence of your working practices now.”
There are four key areas to address to help support an “outside IR35” SDS.
Get your contracts reviewed. If you are believe you are working “outside” of IR35, work with your current client(s) to make sure they understand that your services are employed for a specific reason and that they are not seeing you as an extension of their permanent team. This will avoid any misunderstandings and make it less likely that they will assume you are treated accordingly. Ensure that your contracts are accurate and consistent and clearly state the service you are offering and that it is independent of the client’s control.
Collect evidence of your position as an externally engaged resource and how you are different from your client’s employees and are not working under supervision, director and control. Different
pay and benefits are not enough, collectively, factors such as flexible working hours, unpaid holiday and supplying your own equipment could be easier to demonstrate during the current pandemic. Whilst the majority of roles are home-based at this time there is a stark contrast between contract and permanent employees. Employees expect to have the tools provided to do so, but as a contractor you will already have these available to you, at your own cost. In addition, should you be unfortunate enough to have been ill or needed to take time off to provide care to children or dependants, you will be able to show you have not been paid.
Take out business insurance (specifically professional indemnity) if you don’t already have it. This is another factor HMRC look at when considering whether you are genuinely running your own business or not.
Get expert advice. Recruiters are among many well-versed professionals that can give you clear guidance on how best to approach IR35. At Carrington West, we guided many public sector contractors through the process when it first applied to the public sector.