10 things you might not know about self-assessment
It’s that time of year again! As every contractor and freelancer knows, January is the time to get those accounts…
Unless you’ve been living in an underwater cave with no WiFi for the last few months, you’ve probably heard that the private sector IR35 reforms are set to go ahead in April 2021. Originally planned for April 2020 they were, of course, postponed as part of the economic response to the coronavirus pandemic.
While some have remained hopeful that the legislative changes will be postponed once more, at Kingsbridge we believe this is highly unlikely. For one thing, MPs have already voted on it and the date is now pretty much set in stone unless there is another national or international catastrophe – which we’ve all had quite enough of for one year.
For another, Chancellor Rishi Sunak is going to be looking to claw back some of the deficit caused by the pandemic and, whether we agree or not, HMRC sees IR35 as a money-spinner for the Treasury. Taking all these things into account, we’d be highly surprised if the reforms were postponed again.
As you will already be aware, IT contractors make up a significant portion of the self-employed base and, due to long term contracts, retainers and other factors, they’re an easy target for accusations of ‘disguised employment’. So, it’s very likely that HMRC will have their eye on the IT sector come April 2021.
Hopefully, with the huge number of companies moving to remote working since March, and the massive demand that’s created for IT workers, you’ll have been one of those who’s had plenty of work. But that may mean you haven’t had quite as much time to think about IR35. So, what can you do to prepare?
Get your IR35 knowledge up to scratch
If your IR35 knowledge isn’t perhaps as hot as it could be, you need to brush up. We recommend checking out the Kingsbridge Knowledge Hub.
The IR35 section is full of helpful articles but, if it’s a case of information overload and you don’t know where to begin, we think you should take a look at ‘IR35 in the Private Sector: what you need to know’ and our IR35 jargon-busting glossary. They’ll give you a helpful baseline and, from there, you can dive into some of the more specific articles.
Talk to your end clients
The reforms mean that your end clients become responsible for issuing your Status Determination Statement (SDS) which places you inside or outside IR35. This should be based on your contract and working practices. You do have a right to appeal and your client must get back to you within 45 days, but they have no obligation to change their mind.
So, your job is to ensure they have no reason to not place you outside IR35. This starts with you taking a good look at your contract and flagging any wording or clauses (or lack thereof) that could give HMRC cause to think you are inside IR35.
You then need to do the same with your working practices, looking at them in relation to the main status tests and deciding if there are any issues there. If you have problems with either your contract or your working practices then you need to have a chat with your end client.
After all, the most beneficial thing for everyone is that you are unproblematically outside IR35, so it’s in their interests as much as yours that you work together to make any necessary changes.
Use a status tool
The next thing to consider – and probably talk about with your end client – is whether or not to use a status tool to help determine your IR35 status. The Kingsbridge Status Tool is a hybrid tool which means you get the best of both worlds between automated and manual reviews.
This means you get an instant determination based on your answers, as well as a more nuanced downloadable report that gives feedback and advice on the answers you provided and shows the strengths and weaknesses of the engagement.
If you are a borderline case with an indeterminate result, your review is passed to our team of IR35 experts who will contact you for more details and then carry out a manual review.
So, either way, you can be confident in the status it gives.
Look into IR35 insurance
Finally, you can protect yourself with IR35 insurance that flexes to provide cover for whoever in the contractor supply chain holds the tax liability for any given engagement. So, if HMRC were to investigate a pre-April 2021 engagement, the policy would cover you, but should they investigate a post-reform engagement, the cover would flex to protect your fee payer.
Kingsbridge’s IR35 Protect is just such an insurance product. It includes all standard legal expenses cover, plus cover for taxes, interest and penalties for IR35 investigations.
The Premium package, also includes unlimited access to the Kingsbridge Status Tool, which would normally be £50 plus VAT per review. To add IR35 Protect to your business insurance roster, give our friendly, expert team a call on 01242 808740 so we can discuss your requirements.
In short, it’s vital that, as an IT contractor, you prepare for the forthcoming IR35 reforms. April isn’t very far away now and it’ll be 2021 before we know it.
So, start having those conversations with clients and doing your research into what will work for you.
