Tax Return

IR35 will change in April, are you ready?

Feb 1, 2021

IR35 may seem new to you, but it isn’t. Introduced in March 1999 and becoming law in 2000, this latest amendment has caught many businesses off guard due to previously being the sole responsibility of the contractor. Yet it is crucial to get right. Changes on it are coming into effect from April 2021, bringing risk to businesses and requiring a clear understanding on how it can affect you and the contractors you hire.  

There is still time. 

It is very unlikely that these changes will be delayed again as they were last year so preparations and actions taken now will at least create peace of mind come April, and allow for contracts to continue smoothly in the coming months. 

So, what’s changing? 

Liability. While IR35 is not a new rule, these changes shift where the responsibility is and therefore where the risk lies as it becomes the role of the client to correctly identify contractors falling either inside or outside of IR35. 

Reviewing each contract to ensure they all appropriately match the work being done can seem daunting and time consuming so understandably many companies would think to look at a blanket assessment 

What could happen if I have all contractors under a blanket assessment? 

  • Contractors who should not be deemed inside IR35 will look for alternative roles 
  • They may not feel treated fairly without individual assessment potentially leaving your company with a poor reputation 
  • Future talent and skills will be unlikely to seek your company at the risk of a loss of income and unfair treatment 

Avoiding all this can be achieved with a case-by-case assessment that is beneficial for both you and your contractors so contact us today to see what we can do to solve this and mitigate the time this process takes for you. 

90% of contractors said that they were willing and happy to be involved in the process with their client, helping them to change working practices models in order to get a legitimate outside IR35 decision. If that decision incorrectly categorises a contractor then over two thirds have said they would look for another role. That combined with clients having a lack of collaboration, understanding, and education on IR35 will only make the numbers rise and create an environment where clients can no longer entice the best skills and talent in the future.  

While IR35 is still trying to get the best for contractors, there may be several who discover their status changes, but it is for this reason that the change in legislation is shifting the responsibility for IR35 assessments. Illegitimate outside IR35 contractors may be losing income they were not entitled to in the first place in the bid to discover ‘disguised employees’ as a part of this anti-avoidance tax legislation. Categorising contractors appropriately can pave way for those rightfully looking for outside IR35 work and can generate a more balanced environment. 

What is there to help me? 

The HMRC have provided an online tool called CEST that helps calculate what contractors should be deemed as within your company, however, there are major concerns over the accuracy of an algorithm based tool, especially when dealing with someone’s income. Contractors look at losing around 20-30% of their take home pay and in many cases can lose much more if they are deemed inside IR35 instead of correctly outside, making them unable to pay their bills and cover costs. 

On the other hand, personal and individual assessments on a case-by-case basis allows for both parties to be confident in the fact they are getting the best out of the partnerships and are secure in their positions with HMRC. Now this sounds like it’ll require a lot of your time, but we’re helping clients get the most out of it and taking some stress away from the process with our in-depth knowledge on it as we’ve already taken the time to understand it.  

Arrange some time with our IR35 experts 

Email: IR35@highfieldps.co.uk or arrange a call using the form below. Ask us anything you want; from understanding IR35, through to exploring solutions to get your business ready. 

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