You can’t run from it, you can’t hide from it and despite some wishful thinking, IR35 will be changing from April 2020.
April will come around before you know it and so it is better to get ahead of the curve and start considering how it may impact your business.
What is changing? Everything, but also in some ways, very little.
HMRC have not had a successful decade in targeting companies under IR35. They have lost the vast majority of the cases at the tax tribunals (despite a few wins lately with tv and radio presenters) and IR35 is not yielding the return the government require.
The first step in tackling this problem for HMRC was to change IR35 in the public sector. This happened in 2017 and it was not long before the government started consulting about bringing about similar changes in the private sector.
From April 2020, the responsibility for determining IR35 will rest with the end client (where the work is in the public sector or where the client is a medium or large company in the private sector). The client will have to provide a Status Determination Statement to the parties in the supply chain confirming whether IR35 applies. The legislation stipulates that reasonable care must be taken in this process and clients cannot implement blanket decisions.
The fee payer – whether that be the client, an agency or other intermediary, will then be responsible for paying the PSC accordingly.
The principles of whether a contract is caught by IR35 have not changed, only who is liable.
Status Determination Statement
IR35 is a highly complex area of tax law where even tribunal judges have commented recently that it requires clarification and they were unsure of their decision.
In the recent IR35 case of Paya Limited v HMRC, a senior HMRC officer was noted to say that for those he trained on IR35, they would be competent after three years and understand it after five years. This does not bode well for clients who are saddled with the responsibility for determining whether IR35 applies and keep abreast of new cases and their meaning.
It would take a considerable investment in time and resources for end clients to train people in the organisation to carry out the IR35 assessments and given reasonable care has to be taken to discharge the liability and the individuals can appeal an assessment, there is no shortcut to this.
It is of course always possible to have the rule that contractors will no longer be used but this unnecessarily restricts flexibility and either increases costs considerably or means lower rates have to be offered.
Why not outsource this?
You read our minds, why go through all of this when you can simply work with Trinity to achieve this. We will speak with the contractors, carry out workplace assessments, provide the Status Determination Statement and handle any appeals against this. It is a no brainer; you outsource the responsibility and can then demonstrate reasonable care has been taken as you have instructed specialists in this area.
An alternative is that you train your staff in this area, but do not underestimate how difficult this will be for the advice to be accurate and how expensive and time consuming it will become. If clients dispute their opinion, they will have to have sound case law knowledge to be able to stand by their original opinion.