Experts share advice on handling private sector IR35 reforms
by Alan Little
IR35 experts have been weighing up the implications for recruiters and contracting professionals of the decision to roll out public sector IR35 reforms to the private sector in April 2020.
A Treasury paper released to coincide with the budget statement revealed that the new rules will not apply to Britain’s smallest 1.5 million businesses, although a further consultation scheduled for the coming few months will shed more light on how these businesses will be defined and how the reforms will be operationalised. The consultation will inform the draft finance bill which is due to be published in the summer next year.
The Treasury paper also clarifies that the reforms will not have a retrospective purview as in the public sector, so that contracting professionals operating through limited companies in the private sector will not find their previous engagements coming under scrutiny.
Speaking to Recruiter magazine, Jacqueline McDermott, a consultant solicitor at the law firm Keystone Law, urged recruitment agencies to proceed forthwith with an audit of their business even though the reforms will not come into effect for 18 months.
She said: “They need to do an audit of what contracts and consultancy agreements they have got in place, what might be affected and who it might affect.”
Welcoming the delay in the roll-out of the reforms, Christopher Tutton, a partner at Constantine Law, said that it would allow recruiters to prepare for the changes and make any necessary amendments to their contracts with end-clients and contracting professionals.
Recruitment agencies, he added, may wish to amend their contracts to give themselves the right to be supplied with information to ensure they can properly evaluate whether a contracting professional is inside or outside IR35.
At present, he observed, there were two additional “unknowns”. Firstly, the time interval may allow for corrections to be made to the way in which the reforms were implemented in the public sector, especially in relation to the heavily-criticised CEST tool, and secondly, the prospect of a no-deal Brexit may force the Chancellor, as Mr Hammond himself intimated, to prepare a new budget.
Meanwhile, contractor tax and IR35 experts at Qdos Contractor have advised private sector contractors not to panic. Until the reforms are implemented in April 2020, they will remain responsible for determining their own IR35 status. However, contractors are best advised to assess their tax and employment status with contract reviews and seek ways now of protecting themselves from an enquiry.
For those contracting with small enterprises, the current rules will continue to apply but contractors working for larger businesses should take comfort from the fact that they have been given time to prepare.