How to take the private sector IR35 reforms in your stride – What the IR35 changes mean for you

2019-08-27 |  Clare Allan

Do you know how you’re going to respond to the changes to IR35 that are coming in April 2020?

We speak to many clients who aren't clear on what these changes are or what they mean for their businesses.

Like our clients, you may be concerned about what it means for you and whether you will be able to continue to use contractors after April 2020.

The good news is that done properly you can still use contractors compliantly outside of IR35, you just need to make the necessary changes to ensure your business is set up to do so.

To help you with this we created a detailed guide which walks you through what the changes are and what you need to do to comply with them. You can download it here.

So what are the IR35 changes and why does it matter to you?

Under the current regulations, it’s the contractor who must determine their IR35 status. But as was confirmed in the Draft Finance Bill published by HM Treasury on 11th of July, this is changing for medium and large businesses like yours.

From April 2020 the onus will shift to you as the company engaging them to determine the employment status of your contractors. You will need to assess each role and confirm at the outset whether it’s inside or outside of IR35.

If you want to continue to engage contractors for roles outside of IR35 – like many of the Change and IT PMs and BAs currently working on your projects – you must distinguish the role from the outset as outside of IR35, then make sure the contractor delivering that role is able to work, and is working, in a way that’s compliant with their outside of IR35 classification.

To comply, you’ll need to review your current approach to engaging contractors and you may need to change some of your business practices, processes and systems so that you can do so effectively. Done properly, you can take steps to demonstrate to HMRC that the contractors you have in roles outside of IR35 are operating correctly.

Allowing you to access key services and skills just as you do today.

What HMRC deems as sufficient proof that someone is working outside of IR35 is a grey area, and unfortunately there’s no ‘black and white’.

They do, however, have four key criteria for assessing IR35 status. These are:

  1. Personal Service - Can the contractor bring in a replacement to perform their duties if they’re unavailable to work?
  2. Control - Will the contractor use their skills and experience to do the work they’ve been brought in for without direct day to day supervision?
  3. Financial Risk - Does the contractor carry some form of financial risk that an employee of your company wouldn’t?
  4. Part and Parcel - Is the contractor entitled to any company benefits or do they participate in company initiatives such as staff appraisals?

To help keep your business safe and give you the best possible chance of proving that your contractors are indeed working outside of IR35, we recommend that you take no chances and fix as many of the issues related to these criteria as possible.

While you can never be 100% sure, this will give you the best possible chance of demonstrating compliance to HMRC if challenged.

To help you understand each of these criteria we developed our detailed IR35 guide. In this guide we take a detailed look at what these four criteria are, the problems associated with them and how you can fix any potential issues in your organisation to ensure you’re ready for the IR35 changes in April 2020.

If you want to get our full guide on what you need to do to ensure you are ready for the April 2020 IR35 changes then click here to download it today.