Will IR35 be delayed again?
Right now, everyone we speak to – be it contractor, recruiter or end client – has one hopeful question on their lips: will IR35 be delayed again?
It may seem a bit like wishful thinking, but not exactly a silly question. After all, back in March we were barrelling towards the April 2020 launch of the new IR35 legislation when we were pulled up short by Chancellor Rishi Sunak’s announcement that it would be put off until April 2021 in response to the growing coronavirus pandemic. The reasoning at the time was sound. The self-employed were dealing with quite enough as their incomes vanished overnight – literally in some cases – and the last thing they needed was a load of avoidable confusion and uncertainty being piled on top of unavoidable confusion and uncertainty – never mind the businesses who were trying their best just to keep afloat without having another layer of bureaucracy to weigh them down. It was a good decision and a welcome one that was appropriate for the circumstances of the time.
That brings us to now, with rising infection rates, increased restrictions, many areas of the UK in full local lockdowns, and the government saying they expect this to last for another six months until next spring. Things are still uncertain, particularly economically. Many contractors are still finding business slow and for some it’s not yet started back up at all as end clients try to keep going in spite of diminishing government support. While things are better for the most part than they were back in March, we are a long way from recovery. So, it’s certainly not unreasonable to wonder if IR35 will be delayed a second time. After all, who needs to be getting to grips with that at a time like this?
So, will IR35 be delayed again?
We hate to say it, and we know it’s not what anyone particularly wants to hear, but no, it almost certainly won’t be delayed again. For one thing, MPs voted to set the launch date in stone and, while that could be changed if the government really wanted to, it’s unlikely that they will.
The IR35 reforms at their heart are something of a revenue-raiser, an attempt to draw more money into the public coffers by identifying contractors who are, in actuality, ‘disguised employees’ (read more on what consitutes a disguised employee <here>) and should be paying a higher rate of income tax and National Insurance. While we doubt the amount of tax potentially owed to HMRC through IR35 will come anywhere near the amount spent on coronavirus support, it would at least – as far as the government is concerned – be a way of beginning to plug the gap.
If the government is right and recovery can begin next spring, then in their eyes the IR35 reforms are perfectly placed to begin recouping some of their costs. It would stand to reason, then, that they will go ahead in April 2021 as planned.
What should I be doing to prepare for the IR35 reform?
As things stand, the best thing to be doing is getting yourself prepared. It may feel like a low-priority task on your to-do list, especially if business is slow, but being ready for the IR35 reform is the best way to ensure you’re an attractive prospect to clients when things are picking up in your industry again.
We recommend that all contractors should be taking the following steps, if they aren’t already:
Check your contracts – Go over all of your active (or paused) contracts, as well as your own standard template and check out all of the wording to ensure it points to you being in business on your own account and not an employee.
Check your working practices – Take a look at some of the main and minor status tests for IR35. These are things such as right to substitution, mutuality of obligation, and levels of control. As well as being reflected in your contract, they should also be reflected in your actual working practices with your client.
Speak to your clients – We know now might not feel like the best time, but it’s good to chat with your clients about your IR35 status, especially if things need to change. You may need to speak to them about negotiating contract changes, or letting them know you’ll be adjusting how you work. Either way, stress that it’s beneficial to both of you. After all, if you have everything running smoothly, it reduces any risk of them being found liable.
Speak to your recruiters – If you work with recruiters, it’s also worth having a chat with them to notify them of any changes you’ll be making. This will also help them to “sell” you to clients as they’ll be able to present you as someone who has considered IR35 and is taking measures to ensure you’re risk-free.
How can Kingsbridge help?
One last preparation step you can take is purchasing IR35 insurance. Kingsbridge offers IR35 Protect, which is unique in that it flexes to cover whoever holds the tax liability. Right now, that’s you so the cover would protect you should you be subject to an IR35 investigation and found to owe tax before the reform deadline. However, come April 2021 it flexes to cover the fee payer, whether that may be your recruiter or client.
It can even help your end client with your Status Determination Statement (SDS) by offering IR35 reviews (one with the Standard package and unlimited with the Premium package). This gives them expert insight into your engagement, helping them make an informed choice on your IR35 status.
In short, IR35 Protect manages the risk of falling foul of IR35 for you, your recruiters, and your clients. To find out more, you can speak to the Kingsbridge team today on 01242 808740 and we can help ensure you have the cover you need.