How employers can avoid IR35 missteps

If you’re reading this, you’re probably anxiously awaiting April 6th, when the IR35 tax legislation is reformed for the private sector. Many employers will find themselves in a state of uncertainty, wondering whether they can still hire contractors and what steps must be taken to avoid getting stung by the new rules.

Keep reading to discover some of the things you should bear in mind next month when you become responsible for determining contractors’ IR35 status. We also have an extensive guide for employers available for download here.

Don’t rely on blanket assessments

Our survey showed that 35% of contractors are concerned about clients wrongly assessing their status. An incorrect judgement could result in loss of earnings for contractors and a decrease in future contract work, but they’re not the only ones who would lose out. Chances are the contractor would have to increase their rate or be unwilling to take the job, meaning you could lose the best person for your project. Plus, you could be throwing money away by paying superfluous tax and NICs, so it’s important you get it right.

There are some quick-and-easy ways to identify whether a role is inside or outside IR35, but they aren’t without problems. HMRC’s own CEST (Check Employment Status for Tax) tool is heavily flawed as it makes sweeping assumptions about all contracts and ignores context. Likewise, role-based assessments are oversimplified and could cause upset between you and your contingent workers.

We recommend conducting role-based assessments in conjunction with individual assessments that fully consider the scope of the role. Our Role Determination Tool uses carefully planned questions to assess the IR35 status of a role while avoiding generalisations. Find more information on this in our guide.

Do your due diligence

If there is one area you definitely need to check with a fine-tooth comb, it’s your taxes. This will be even more true soon as fee payers will carry the tax liability and be responsible for any mistakes. It is crucial that you have a solid plan in place so that you don’t find yourself in hot water.

Everyone in your business must be on the same page, otherwise inconsistencies are bound to pop up. IR35 determinations will be heavily scrutinised by HMRC for the foreseeable future, so be careful not to slip up. Make sure you keep accurate records of all your payments in case of a HMRC audit and make sure you have a strategy in place.

Also, think about who will be making IR35 decisions and how they will be made. Consider whether you’ll manage the rulings yourself or leave it to an external service provider. If you want to go with the latter, there are things to bear in mind when selecting a partner.

Choose the right partner

When choosing an IR35 compliant recruitment partner, you should look for the ability to work flexibly to your specific requirements. Every contract requires careful consideration; one solution does not fit all – that’s the problem with the arbitrary methods mentioned earlier. The right organisation will create bespoke solutions tailored to your needs.

Deltra is fortunate to have a range of options available to us as we’re affiliated with a globally recognised umbrella company. This means we can work on your behalf with contractors differently depending on the circumstances, whether through the PAYE model, limited company or umbrella company.

We’re proud to be able to help clients deliver their transformation and change projects by taking on the entire recruitment process under our Consultancy Model. This is an ideal option for employers who want a true interim solution and want to maintain that distance from the recruitment details

For more information, download Your Employer’s Guide to the IR35 Reform here.

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Minesh Jobanputra

18th March

Industry Insight ir35