The journey to the IR35 reforms has been anything but dull and this past year has been something of a rollercoaster. This time a year ago we were hurtling full pelt towards the April 2020 reform deadline. We saw risk-averse end clients panicking and slapping bans on the use of PSC contractors, or issuing all of them with blanket determinations that placed them inside IR35, while professional bodies warned them that this would lose them access to some of the top talent in their sector. The government was lobbied, the Lords damned the legislative changes, but then it all came to a screeching halt.
As the April 2020 deadline loomed large, the government put on the brakes as a means of easing economic uncertainty during the first wave of the coronavirus pandemic and rescheduled the reforms for 2021. Hopes that this might again be delayed (or even cancelled) were dashed when MPs voted to set the new April 2021 date in stone. So, now we’re back where we started, with around six months to go until the reforms hit.
How you should be preparing for IR35 reform as a contractor
You really should have preparations for IR35 well under way by now but if you don’t, now is the time to get started so you have a chance of being organised by April next year. There is virtually no chance of another delay or a cancellation of the legislation so sitting back and hoping it won’t happen isn’t the right strategy. Instead, there are several things that you, as a contractor, can do to ensure you’re prepared for next year:
- Get to grips with your tax status by making sure that you fully understand IR35.
- Check your contract wording for any current contracts, or any standard contract templates you may have. You want to make sure that the wording leaves no doubt that you are in business on your own account and would stand up to scrutiny by HMRC.
- Look at your working practices and ensure they are IR35 compliant. If anything in your working practices could place you inside IR35 then you want to change it.
- Look into IR35 insurance in order to make yourself less of a risk to recruiters and end clients.
- Talk to your end clients about your status determination.
How to speak to your end client about your status determination
Try to remember that your client isn’t your enemy here. They’re trying to protect their business from risk so placing you inside IR35 may seem like the safest thing to do, especially considering the current economic climate. Your role is to educate your client so that they can make an informed decision that works for both of you.
- Don’t be combative or confrontational. This should be a discussion, not an argument.
- Go through your contract with your client and demonstrate the clauses and words that demonstrate you’re outside IR35. Be sure to flag any problematic areas that could place you inside and negotiate ways in which they could be changed.
- Do the same with your working practices and politely make sure your client understands that you are a service provider, not an employee and as such you can tell them – within reason – where, when and how you will be working.
- Be clear about the financial impacts of placing you inside IR35, especially if this could result in you raising your rates.
- Point your client in the direction of Kingsbridge so we can help them make informed decisions.
How Kingsbridge can help your end client with IR35 reform
As well as our IR35 Protect insurance – which flexes to cover whoever holds the tax liability in any given engagement – we also have our IR35 Assessment Tool.
This tool is much more comprehensive than ‘CEST’ used by HMRC and has been developed by Andy Vessey, Head of Tax at Kingsbridge. Andy has defended more IR35 investigations than anyone else in this industry, so the tool bases its assessment on real life cases and is driven by an experienced expert. A single review costs just £50 (excluding VAT at 20%), but if you are covered by IR35 Protect Standard, one assessment is included at no additional cost, while IR35 Protect Premium includes unlimited assessments.
So, when you’re speaking to your end client about the IR35 reforms, refer them to Kingsbridge so they can have an expert hand guiding them through the status determination process. Our team is there at the end of the phone, they just need to call 01242 808740. The result is less stress, less worry, and a happier contractor-client relationship.
