IR35 – start planning now

Today will see the final debate in the House of Lords on the Finance Bill, which contains the new IR35 Off Payroll rules for the private sector. This step is usually a formality, as tradition dictates that the House of Lords will not veto a Finance Bill. However, prior to this debate the government has published its response to previous issues raised by the Lords. The clear message being that the government intends that the legislation will apply in its current form from April 2021, without further delay, and businesses should start to prepare.

At the start of the year, the House of Lords carried out an inquiry into the extension of the IR35 rules, hearing evidence from interested parties and produced a written report. The issues raised included the limited preparation time; lack of independent review as to the rules for services to public authorities; the government support available; the Check Employment Status Tool (‘CEST’); the costs for business and effect on the labour market. The report also questioned the need to consider employment rights and the likely increase in umbrella use as a result of the new rules.

Whilst the government’s response addresses all of the issues raised, stressing the steps that the government has or will be taking, including reforms in other areas, and a post implementation review, it also stresses the need for business to have certainty and therefore the changes will go ahead as planned in April 2021. HMRC has stated that this additional time should be used productively and efficiently, and with the legislation in place business can prepare in the certainty as to what the rules will be.

Hirers and recruiters need to understand the new rules, which engagements they potentially apply to and the responsibilities of each party. For hirers, policy will need to be formed on making assessments and/or the type of engagements that are acceptable. For recruiters, understanding the information transfer, assessment, and liability will all be essential factors.

For any engagement which it is considered will fall outside of IR35, both hirers and recruiters would be wise to make sure that the engagement is supported, in so far as is possible, by both suitable contracts and working practices. However, for engagements which fall inside the rules, the reality is that alternative engagement options such as PAYE or umbrella may be required.

As recruitment law specialists, Lawspeed can assist with an understanding of the new rules, status assessments, and the risks, obligations and terms associated with alternative engagement models such as PAYE or Umbrella. Contact the Lawspeed IR35 team on 01273 236 236 or