Keep your contractors outside IR35 with these off-payroll expert tips
The self-employed contribute around £305 billion a year to the UK economy and with businesses hard hit by COVID, the unique skills, flexibility and innovation they bring to the workforce are going to be needed now more than ever. Lockdown has brought tough times for us all, but the self-employed have been especially hard-hit. Gaps in COVID relief schemes have meant many have fallen through the safety net. And to cap it all off, the IR35 reforms come into effect from next April. It's unlikely the government will postpone these again, so contractors, recruiters and end clients should be working on this now to make the transition as smooth as possible. With contractors being so valuable to businesses and recruiters alike, we need to make sure we take care of contractors in testing times.
As a recruiter, it's in your interests to keep your contractors happy and to protect yourself and your end clients from any extra tax liabilities. We’ve put together a list of our top tips for how recruiters can make sure their contractors stay outside IR35; protecting incomes, jobs, and clients at both ends.
Do your IR35 research
We can’t lie - IR35 can be both a tedious and complex subject, but there is a lot of expert information out there to support recruiters, including on this blog. If you have a firm grasp of the legislation you’ll feel more confident in lobbying end clients and advising contractors, making your agency stand out above the rest. IR35 is here to stay, so taking the time to research and understand it now is an investment in the future. IR35 rules have applied to public sector organisations since 2017, so there is a growing body of case law on the subject which you can dig into if you have any specific or unusual queries - the Lorraine Kelly case being one famous example!
Invest in good IR35 consultancy
Save yourself time and effort and tackle more complex cases head on by investing in good IR35 consultancy. This will help you set up processes, policies and procedures that simplify things moving forward. Engaging consultancy can offer a level of protection if things go wrong and help recruitment agencies prove that they have taken the “reasonable care” that the legislation requires. Consultants will also be able to advise on any necessary changes to contracts or working practices to enable contractors to stay outside IR35.
Choose the right tool for status determinations
The obvious first place to go for status determinations should be HMRC’s “Check employment status for tax” (CEST) tool. However, the questions on the tool can be overly-simplistic and the results can’t necessarily be relied upon. Indeed, HMRC themselves attempted to get evidence from the CEST tool omitted from a tribunal case last year, calling it “irrelevant”.
Smart recruiters will look to develop their own systems and protocols for checking status determinations. While a specialist IR35 accountant might be an option for firms with extra cash or very few contracts, agencies might be better served by a solution like Kingsbridge’s IR35 Status Tool, which produces a sophisticated automated determination taking into account the circumstances of each individual contract and working arrangement. This is backed up by clear expert advice from our off-payroll working specialists. Remember, a status determination can ultimately only come from the end client, but as a recruiter you are well placed to advise and recommend. If you can show your end clients robust evidence as to why your contractors should be outside IR35, you stand a better chance of getting the determination that you and your contractors want.
Maintain good communications
As a recruiter you are used to being a champion negotiator between contractors and end clients - and IR35 status determinations are really going to put those skills to the test! End clients may get skittish around status determinations and want to declare all contracts inside IR35 in order to keep things simple for them and ward off possible trouble. It's your job to explain to them why this isn’t a good idea. Fight your contractors’ corner by explaining that blanket determinations are likely to be unlawful: they don’t demonstrate reasonable care and they could find contractors taking them to an employment tribunal to demand parity with other employees. Use your learning from your research, consultancy and the Kingsbridge IR35 Status Tool to back up your suggestions with solid evidence and concrete actions that clients can take.
Be transparent about the process with your contractors
In these times, contractors aren’t going to want to wait around too long while you sort things out - they’ll be looking out for that next contract. Brief them at the beginning as to what your process for status determination is and the likely timescales involved. Keep them informed about the process as it goes on. Make sure you check in and update them regularly so they know things are in hand giving them confidence in you so they don’t look elsewhere for other opportunities.
Whether your recruitment agency is dealing with a handful of contracts per week or hundreds, IR35 Protect from Kingsbridge can help. The Kingsbridge IR35 Status Tool produces suggested determinations within minutes to help guide your end clients to informed, robust decisions. An indicative decision can be produced in minutes, streamlining the process and getting contractors into work quicker. Recruiters can also combine this with our expert in-house off-payroll consultancy and IR35 legal protection to give you a complete IR35 solution. Book in for a demo today here.