The government has finally launched a review into the changes to IR35 legislation which will affect medium and large private sector organisations and have far-reaching impacts on the way they engage with non-permanent workers.
Of course, it’s great news that they’ve delivered on this pre-election promise. However, the timeframe between the review – from now until mid-February – and April, when the reforms are due to come into effect, is woefully small.
Many of us had hoped for a delay to the changes until 2021, but this now seems off the cards.
With this is mind, I’d like to answer this article’s title: no, you can’t afford to delay your preparations for IR35 changes. To do so, would be to risk being caught out.
But what could these changes mean for your business?
The reforms to IR35 legislation shift the responsibility of determining the tax status of personal services company (PSC) workers to the engager. If the PSC’s assignment falls outside of IR35 legislation, they are deemed to be self-employed, so gross payment will be made to the PSC. Conversely, if the assignment falls inside of IR35, the professional should be treated as an employee, applying PAYE and NIC deductions from their payment.
One need only look at the public sector, where these reforms were hastily enforced in 2017. Many public sector organisations:
- lost highly skilled contractors to organisations who were prepared
- impacted their reputation with contracting talent, making it hard to attract temporary talent
- delayed or scrapped projects altogether
Yes, the private sector has had more time to prepare for the reforms. However, in a recent survey we ran, 68% of private sector respondents said they expect to see potential cost increases when IR35 reforms come into effect, 56% anticipate a loss of key talent, and 46% think they will experience greater difficulty engaging with non-permanent workers. This last point should be of particular concern considering how skills-short the current talent market is.
Here's what you need to do
- Determine whether an assignment is inside or outside of IR35
This can be a very complicated process. You need to have full visibility of all the workers your organisation engages with who are paid via agencies and consultancies as well as knowledge of how they are paid. You will also need to have the expertise to determine the tax status of each assignment.
- Work with an expert partner
We have a lot of experience when it comes to navigating the changes to IR35, through our support of hundreds of public sector clients when the reforms were first introduced in April 2017. We use a market-leading testing model to accurately determine the tax status of each PSC assignment and provide an audit trail which means any appeals can be efficiently managed.
- Consider outsourcing your engagement with contractors
We’re able to support your organisation whether you engage with an individual PSC worker or hundreds – for example, if you expect to use a high volume of temporary workers in 2020, outsourcing your temporary worker provision through a managed service programme (MSP) would mean Hays carries out accurate assessments for every temporary worker placed with you.
Visit our website for further information about outsourcing your engagement with contractors, or for further information about our IR35 solution, email IR35@hays.com.
About this author
With over 20 years experience within the industry, Geoff’s previous roles providing integrated recruitment solutions to the financial markets has lead him to partner with a range of corporate clients. His position is pivotal to ensure Hays deploys the right recruitment solutions for businesses within UK & Ireland; RPO, MSP, SOW. He manages the internal sales strategy in addition to leading the Hays Consultancy Service (SOW solutions).