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IR35 Changes

Posted 06.08.19

IR35 – What is actually happening?

The IR35 legislation, previously introduced into the public sector in April 2017, is now being extended to include the private sector space.

The current draft rules propose that the changes be applied to the private sector from 6th April 2020, affecting medium and large that engage independent workers and contractors.

Research has found that less than half of all recruiters believe that their clients are aware of the implications of these changes are implemented, 10% said ‘yes’, 21% said ‘no’, with the remaining 69% saying ‘not sure’.

What does this mean?

Once in place, organisations employing contractors and independent workers will assume responsibility for setting the tax status of these individuals, something currently assumed by the independent worker themselves. The tax liability will also transfer from the independent worker to the ‘fee-paying’ entity; usually the recruiter or the business that directly employs the individual.

Following the recent changes announced, most recruiters anticipate that contractors will look to use umbrella companies, as opposed to their personal service companies, in order to avoid issues and errors in tax calculations and payments.

How do we ensure we comply?

With only months to go until the proposed deadline, time is running out for businesses unsure and unequipped to handle the changes. The draft rules have also caused concern within the recruitment industry, with many questioning the proposed date of next year.

Tom Hadley, Recruitment & Employment Confederation’s director of policy and campaigns advised: “We know from experience that the IR35 rules are a huge problem for employers and contractors alike. Making sure everyone pays the right tax is essential, but the rules need to be clear to be effective.

The last thing that the public sector businesses need at this time of Brexit uncertainty to an already fragile business landscape. The government must urgently reconsider its choices and delay changes to IR35 until at least April 2021.”

Working with a recruitment organisation compliant in handling contractors under IR35 legislation is a steadfast solution to ensuring a smooth transition and continued use of contractors and independent workers.

Matthew Devine, Divisional Director of Cordant Engineering said: “Contractors are a valued source of labour in many industries so this legislation will affect a wide range of businesses, so it is vital for experienced recruitment agencies to support their clients and contractors during implementation and roll-out.”

If you’re concerned, need some advice or want to know how engaging with our services can help your business, get in touch with our team here.

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