IR35 Reforms are coming to the Private Sector – LIKE IT OR NOT

Clients cannot afford to bury their heads in the sand

Despite the uncertainty of the economy and the continuing fall-out from Brexit, the government are still going ahead with the extension of the IR35 reform into the private sector. Consultation has now closed and the final bill is planned for November 2019 to come into force April 2020.

The private sector extension of the off-payroll rules will use the public sector legislation as a starting point. This means that private sector end clients (unless classed as a “small business”) will be required to make a determination of a worker’s employment status and communicate this down the supply chain. The feepayer, (usually the recruitment firm paying the worker’s PSC) will need to make deductions for income tax and NICs, rather than paying amounts gross to the PSC. Other than the dispensation given to small businesses, the classification of which is covered in this consultation, the changes being proposed here will apply to both the private and public sectors. Therefore, public sector organisations will also need to be aware of the changes.

Worryingly, but perhaps not unexpectedly with everything else businesses are contending with, recent surveys have shown that there is a gap in knowledge within the private sector and contractors are not being communicated with effectively.

Data from a recent Brookson Legal Survey conducted with a wide range of UK businesses has revealed:

• More than half of UK firms are considering taking a blanket approach placing contractors in scope of IR35 (no time to assess cases on an individual basis).
• 41% of those surveyed would not consider above approach (don’t want to wrongly assess any contractors for risk of losing them).
• 73% of businesses agreed that IR35 will have an impact on the number of contractors they hire.
• Of these, 48% claim IR35 will encourage them to reduce the number of contractors they hire, while 39% anticipate that there will be fewer contractors available.

A further survey conducted by Qdos has highlighted further concerns expressed by contractors:

• 92% of more than 1,000 UK contractors have not yet been contacted (by client or agency) to discuss IR35.
• Only 14% of contractors have faith in clients and agencies to contribute to accurate IR35 decisions, 34% are undecided.
• 52% do not believe clients and agencies can manage next year’s changes.
• 86% of contractors would challenge ‘inside IR35’ decision made by their clients; 14% would not.

We have heard from contractors that some clients are already considering enforcing ill-informed decisions around rates and their approach to IR35 now in preparation for the reforms.

At Church International, we are here to look after the best interest of our clients and candidates alike. Part of that is being aware of new regulations to be able to offer guidance to both sides of the recruitment fence when needed. IR35 is no different.
We are taking affirmative action to ensure that clients have IR35 on their radar and to provide information and guidance to contractors and clients as part of our TLC offering here at Church International so that accurate IR35 decisions can be made with joined-up thinking and working in partnership.

Watch this space for further updates. In the meantime, if you are a client looking at the implication of IR35 on your organisation and the impact on your contingent workforce or a contractor who wants to gain more insight into the implications of IR35 on your continued contract career, please register your interested in receiving our IR35 updates or taking part in our regular briefings.

To register interest contact Lesley Hayes:

Telephone: +44 1622 620718

Email:lesley@church-int.com 

Or click the link below to connect with Lesley on LinkedIn.