6 April 2022 marks the one year anniversary of the so-called IR35 rules coming into force for private sector organisations (they had already been in force for public sector organisations since 2017). I recorded a webinar in March 2021 called IR35 – are you ready?. If you don’t know what IR35 is then I’d recommend that you pause reading this blog, go and listen to the webinar and then come back.
Essentially, to recap, since implementation, it has been the responsibility of medium and large organisations within the private sector to assess whether contractors working through an intermediary come within the ambit of IR35. It is key that organisations understand their obligations because they could be the party in the chain that ends up having to bear tax liability and face the consequences if that liability is not met.
There have been lots of learnings for organisations over the last year whilst they’ve been navigating the rules. Generally, our experience is that organisations are taking a risk-averse approach to making status determinations and this has meant that issues that make it all the way to court are still mainly in the media arena, like the recent case against Adrian Chiles. Then there is also the continuing struggle that clients have with the Check Employment Status for Tax (CEST) tool, which everyone has at some point expressed frustration and confusion with. The issue of determination is still a case of considering all of the factors in the round, however, we have seen that the right of substitution is still a critical factor. Another trend that has arisen is the use of umbrella companies (companies set up just to pay PAYE and NI), which the TUC have asked to be banned given their lack of regulation and the lack of employment protections/rights that they offer to individuals.
I would love to hear your feedback – how has your first year of IR35 been? Have you carried out all of your IR35 status determinations this year in respect of the contractors you have on your books? Are you keeping those under periodic review to check that they remain up to date and accurate? Have you updated your contracts to make reference to IR35? Do you understand how the companies that your organisation contracts with are supplying the labour needed to fulfil the contract?
If you need any further advice on this topic, please do not hesitate to get in contact with me.
Wherever you are in your preparations for this change, this webinar will lighten the load.