The announcement in March that the new IR35 off payroll rules would be delayed until April 2021 due to the Coronavirus pandemic came with a huge sigh of relief for many in recruitment. At that point, we did not have final legislation, the outcome of a review was pending and, as a result, many hirers, recruiters and contractors were simply not ready. However, April 2021 is a different story, legislation has now been finalised and barring a significant government u-turn, the new rules will apply to work performed on or after 6th April 2021. This date may seem like a long way off, particularly given the difficult climate for many businesses, but it is only just over 6 months away, with new supplies and extensions already having potential to go beyond the new date.
Key preparation steps include:
- Understanding which client and contractors the new rules apply to – IR35 does not apply to all temporary worker supplies, nor do the new rules apply to all hirer clients, those who fall within the small company bracket or do not have a UK connection are excluded.
- Supporting and communicating with clients – IR35, whilst common to contractors, recruiters, specialist lawyers and accountants, is a new concept for many hiring businesses. Early 2020 saw many hirers simply deciding to cease accepting contractors rather than deal with the new rules and whilst this may be based on a risk averse stance, in other cases the enormity of the task at hand, along with short timeframes may have been a determining factor.
- Ensuring alternative options are available – if a hirer determines that an engagement falls within IR35, then a plan B may be required, whether this be umbrella, PAYE, consultancy or SOW options. The drafting of the legislation and its impact on the use of other models has caused recent controversy. This wording of the legislation and guidance continues to be an issue, however HMRC has stated its policy intention in this area and it is hoped that changes will be made.
- Assessing and managing risk – whilst responsibility for assessing IR35 status rests primarily with a hirer, getting the decision that an engagement falls outside of the IR35 rules wrong can have significant consequences, whether in terms of tax liability or contractual liability to a client. Many client drafted contracts will already include tax indemnities, with new provisions likely to be added. It is always best to check. Risks can be mitigated and outside IR35 arrangements can be supported by having robust contracts and strong assignment descriptions in place.
With little over 100 working days until the rules come into play, Lawspeed is here to help. We have 20 years’ experience in drafting IR35 friendly contracts and even more in servicing the recruitment industry. Our expert IR35 lawyers can help with contracts reviews, advice and training. Contact us on 01273 236 236 or firstname.lastname@example.org.