Is the contracting game up?30th October 2018
After years of uncertainty surrounding the future of IR35 in the private sector, the wait is finally over. In the Budget, The Chancellor announced that much debated and feared IR35 reform will be extended to the private sector in April 2020.
In making medium and large organisations responsible and in-turn liable for setting IR35 status, Philip Hammond has yet again chosen to ignore expert advice and the stack of evidence that made such a robust and compelling case against the roll-out of further changes.
You only need to glance at the chaos caused by public sector changes in 2017 to see why private sector reform a move is widely considered as short-sighted. Public sector is placing contractors inside IR35 without a fair assessment on that persons working agreement. For Example, did you know that if you put all your income into a pension then you would be classed as outside IR35. Unfortunately, the public sector struggle with the complexity of the legislation and no doubt the private sector will to.
The dust is yet to settle and the news of IR35 reform is still being digested, but already thousands of private sector organisations will be searching for answers.
These medium and large organisations will be looking for any information to give them clarity on the rules. They will be working out exactly what their new responsibilities will be and how they go about setting IR35 status accurately. Many will be asking whether they can continue engaging contractors outside IR35 while at the same time protecting their own liability. We have already seen many clients leave the contracting world due to large organisations not renewing contracts and offering contractors full time employment.
IR35 reform doesn’t have to kill the flexible labour market, but it’s now up to private sector engagers to take the initiative. It’s in their hands. Much as it was, and still is, in the public sector. And there are a number of factors these companies must take into consideration.
Should they use CEST – the much-maligned IR35 tool? The answer is not as the sole method of assessing status. Quite simply, the technology cannot be relied upon to provide accurate answers. In fact, it was only a few weeks ago that a judge overruled a determination it gave which led to a contractor being wrongly placed inside IR35.
Secondly, blanket determinations (when a medium and large organisation sets all contractors either inside or outside IR35) are non-compliant. The rules clearly state that decisions must be made with ‘reasonable care’. In addition to this, any medium and large organisation thinking of placing all contractors inside IR35 to protect their liability will not be able to attract these individuals in future. By doing so, they would be shooting themselves in the foot.