Changes to the Intermediaries Legislation (aka “IR35”) will be coming into effect for medium and large private sector organisations from April 2020. If the April 2017 implementation of similar legislation in the public sector has taught us anything, those organisations burying their heads in the sand and not adequately preparing will be caught out.
However, whilst most organisations know they need to do something, it can be hard to know exactly where to begin.
The key is to recognise that this forthcoming legislative change (“Off Payroll Working in the Private Sector”) has the ability to impact all business areas within your organisation – and as such, representatives from a range of departments within your organisation need to be involved in the preparations. So, what should each of your business functions be doing?
Senior Finance leaders should schedule and prepare a series of UK Board meetings to discuss and agree your organisation’s strategy for this change to IR35 and receive regular status updates. During the first of these board meetings, it is imperative that not only are the changes to IR35 introduced and understood – including the probable cost implications of being inadequately prepared – but also that your organisations is crystal clear about who is responsible for the different implementation workstreams and when each task needs to be completed.
Tax teams will need to go through a process of education to fully understand changes to the legislation and the associated risks. While this is quite self-explanatory, they should pay close attention to how it interacts with other compliance related legislation – IR35 should not be seen in isolation. Examples of this may include (but are not limited to) the Criminal Finances Act of 2017, and the Senior Accounting Officer (SOA) legislation.
Procurement leaders should understand their wider contingent labour estate, such as who their organisation is supplied by and the method through which they are supplied. They should also identify business-critical contingent labour in their workforce, both current and for the near-future, and budget accordingly.
The IT function is largely reliant on contractors. It is therefore imperative that vital work carried out by contractors is identified, alongside any specialist needs which may need to be brought in-house to get crucial tech projects over the line.
HR should also have a process of education in place around these legislative changes. They should ensure they standardise a separate set of onboarding procedures for all their contingent workforce, as the days of ad-hoc management of this population set are now over. HR will also play a crucial role in understanding any major, organisation-wide behavioural changes that need to take place – for example, how best to manage the contingent workforce.
Effective communication must be a priority
Of course, these practical initiatives and actions are only one element of IR35 preparations. The other is the timely communication of these IR35 changes and the preparatory steps being adopted by your organisation. Consider who will be responsible for communicating actions and next steps regarding IR35 to your contingent workforce, as they will want to know if they are going to be classified as a ‘deemed employee for tax’ or ‘in-scope’ and if so, how they are going to fit into your organisation going forward.
It goes without saying that business relationships with your contractors are hugely important, and for those in-scope it could be an unsettling change to how they are used to working. If you are not communicating with them in a timely, effective and accurate manner, you risk losing great talent to other organisations who are better prepared. Remember, HMRC have the right to penalise you from April 2020, but the market will penalise you long before if you are without adequate communications.
Work with an expert IR35 partner like Hays
Many organisations in the public sector were not ready when IR35 changes came into effect in April 2017. The result of this was a loss of key talent putting programme delivery at risk, and a significant increase in delivery costs.
That’s why the delay until 2020 for these changes to be implemented in the private sector must be seen as critical lifeline, giving you the time you need to prepare.
However, you must not delay these preparations, as you cannot afford to wait. Have you thought about all the workers that are paid via agencies and consultancies and how they pay their workers? You will need to have full visibility of who they are, how they are paid and have the expertise to determine their tax status.
To mitigate your costs and risks, maintain access to crucial contractors and protect vital business relationships with in-scope workers, consider working with an expert third party to support you throughout your IR35 preparations.
Hays can offer guidance and support throughout this process, having already successfully implemented solutions in organisations into the public sector and within the private sector in preparation for the April 2020 deadline. In short, we have the expertise – so make your problem, ours.
If you would like to understand more on how we can help you mitigate IR35 risks for your business, contact our team at IR35@hays.com today.