2020 was a year of uncertainties but one thing’s for sure, none of us could…
IR35 reform – there are now less than two months to launch, but are you ready for lift-off?
Much has been said about the upcoming changes to off-payroll working (IR35) but with the new launch date just weeks away, all businesses and contractors – regardless of their position in the labour supply chain – need to get IR35-ready.
What is IR35 and why all the changes?
The off-payroll working rules (known as IR35) were introduced in 2000 to ensure that anyone working like an employee, but through a company, pays similar taxes to other employees. HMRC estimates that only around 10% of people who should comply with the rules do so and that the cost of non-compliance in the private sector will reach £1.2 billion a year by 2022/23. In a bid to tackle this, from 6 April 2020, the government is introducing new rules which will shift the responsibility for determining a worker’s employment status for tax purposes onto the private sector organisation contracting them.
According to research last month by IR35 Shield, over half of contractors feel unprepared and are yet to be assessed for compliance for the new rules. But, with investigations and hefty penalties in place for those who fail to comply, it pays to be clued up and prepared.
Education is key
IR35 represents the most significant change to contractual employment we’ve seen in the UK but it doesn’t mean the end of the road for contractor-style employment – it just comes down to both parties doing everything by the book.
In order to avoid projects suffering and a situation like the blanket ban on limited company contractors that occurred in the public sector, it’s vital for contractors to educate both themselves and their clients. Choosing to ignore or drag their feet in addressing the legislation is damaging for all parties. There’s a wealth of content online including whitepapers, webinars and workshops for both businesses and contractors, so invest some time in getting to grips with the reform and how it will impact your work going forward.
Many contractors favour umbrella companies to limit the impact of IR35 and reduce paperwork involved. However, as with any industry, there are ‘cowboys’ within the umbrella world offering non-compliant schemes with the potential to leave contractors in hot water.
Watch out for indicators of non-compliance, such as dubious or unclear payment terms, or a lack of professional accreditation. Many illegitimate umbrellas offer frills or add-ons or can be secretive around their take-home pay quotations – if it sounds too good to be true, it probably is! Do your research, check out reputation and always pick up the phone to us if you’re unsure.
We’ll be sharing more on IR35 throughout the year, so keep an eye on our downloads page for useful content.