Looming IR35 reforms cause confusion

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More than half (54%) of limited company contractors do not understand the details of IR35 and how to correctly determine whether they fall inside or outside of the legislation

In a survey of more than 1,000 contractors by the Morson Group, more than a third (40%) were also unaware of the upcoming reforms to impact the contractor community next April. This raises concerns that employers are yet to begin reviewing their contractual workforce and how they’re supplied.

From April 2020, the responsibility for determining IR35 status shifts to the end client, meaning medium and large private sector businesses have less than five months to take the necessary steps and reasonable care to identify whether their contractors fall inside or outside.

The same survey also saw more than 600 individual concerns and questions raised around IR35 including ‘Can I appeal my client’s determination?’ and ‘Will sub-contractors be offered permanent positions?’

Phil Beardwood, compliance & assurance director at the Morson Group, said: “Some businesses believe that it’s the responsibility of the labour provider to determine the status of their contractor workforce, yet it’s down to the end client to conduct these reviews and ultimately make this decision, which may provide the answer as to why some contractors aren’t yet aware of the forthcoming changes.

Uncertainty caused by the Brexit narrative and the Chancellor’s decision to cancel the Budget has led to some organisations believing that the forthcoming IR35 legislation reform will be delayed or even cancelled.

“This is certainly not the case and the new tax regime governing contractors will remain top of the agenda in the private sector.”

In an attempt to prevent any blanket ‘inside IR35’ approaches – which were reported to have widely been used during the public sector rollout – HMRC has issued specific guidance to ensure private sector employers take ‘reasonable care’ to determine the status of their contractor workforce.

Beardwood added: “Lessons learned from the public sector rollout means that those who do try to cut corners risk losing contractors to a competitor who may correctly deem the same individuals to be outside of IR35.

“Flexible workers are a major contributor to the UK economy and key to the country’s economic prospects, with many of our clients reliant on these ‘talent on demand’ workers, especially those operating in engineering, construction, IT, energy, aerospace, rail and defence.

“If we’re to preserve this vital workforce and remain competitive in a global marketplace, then it’s crucial to assess individuals fairly and on a case-by-case basis, and prevent them being wrongly placed inside, and vice versa outside.”

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