Contractors: What If Your End Client Isn’t Preparing for IR35 Reform?

IR35

As you probably know by now, when the new tax year starts in April 2020 your end client will be responsible for assessing your IR35 status, unless they class as a small private company. This has serious implications for your income, which could reduce significantly if they find you to be inside IR35.

Guide to Demonstrating That You're Outside IR35: Click here to download>>

Assessing IR35 status is a complex undertaking and April is now just a few months away. If your end client or agency have not contacted you about their IR35 preparations, this is cause for concern, but what can you do?

Why it’s important to act now

While the deadline of April 2020 might seem a healthy distance away, it’s still vitally important to act now. Any payments made after the 6th of April 2020 will be covered by the new rules, regardless of when the work was completed. This means the new rules could affect work completed in March or even February, depending on the invoicing terms.

Also, it’s possible that your outside IR35 position can be strengthened with changes to the contract and working practices, but this opportunity will be lost as the deadline approaches. It’s important that the client completes their assessment while there’s still time to take action.

Talk to your end client and agency

The first action we’d advise is to ask your client and agency what their position is and how they plan to proceed. If they’re going to assess correctly, they will need information from you and time is running short. Many clients may not be as aware of IR35 as their contractors are, and may not yet understand the urgency. Talking to them about your concerns could do a lot to resolve the situation.

During this conversation, you might explore the possibility of producing a Confirmation of Arrangements document, which confirms that all parties are in agreement about your IR35 status. This will make it less likely that your client will change your status when they assume responsibility for it.

Involve your fellow contractors

It’s a good idea to talk to any other independent professionals engaged by your client, to find out if they have had any contact about the client’s IR35 preparations, and to organise your approach. Consider approaching the client together as a group to stress the importance of the issue.

If your end client needs help preparing for IR35 reform

Assessing IR35 is a complex undertaking, and your client may not have the necessary expertise readily available. You may be able to help them, and look after your own interests at the same time, by advising them to contact Orange Genie Compliance, who will help them:

  • Assess their current situation, including the size, makeup and likely IR35 status of their contingent workforce.
  • Identify actions they can take to create an “IR35 friendly” environment, to give their contractors the best possible chance of working outside IR35.
  • Where contracts are clearly inside IR35, ensure the correct advice is given the appropriate options are available.
  • Help them implement the necessary processes to control their costs and risks without disrupting the supply chain.

If your end client is not using reasonable care

It’s possible that some end clients will use “blanket” or “role based” assessments – where all contractors are automatically considered to be inside IR35 without taking their individual circumstances into account. This practice is not compliant with the legislation, which specifically calls for “reasonable care” in assessing IR35 status.

The legislation also calls for the client to implement a “client-led disagreement process” which you can follow if you disagree with their assessment of your IR35 status. You would be expected to accept the original assessment while the disagreement process is taking place.

Many end clients are working hard to prepare for the reform, and there will be opportunities to engage with clients who assess correctly.

Understand and evidence your IR35 status now

Whether your client is taking action or not, it’s important that you know what your correct IR35 status is, and that you have evidence to support it if needed. The best way to arrange this is to obtain a professional IR35 review of each new contract from specialist experts like Bauer and Cottrell. A comprehensive, professional review of your written contracts and working practices will confirm your correct status, and act as strong evidence if your status is challenged. A well-informed client or agency will be more confident that you’re outside IR35 if it’s confirmed by such a review.

It’s also important to gather evidence of your IR35 status whenever possible. For example:

  • Retain emails sent to your end client stating that you are working from home or remotely.
  • Add a location to your timesheet to demonstrate an ability to work anywhere and have your flexible hours signed off by the end client.
  • Retain evidence of any other contractor you work alongside, undertaking a similar project role who has substituted.
  • Create and maintain a list of other contractors who have agreed to act as a substitute for you if needed – exchange emails with them to evidence their willingness and agreement to the commitment.

If you have any questions or if we can help in any way please call our expert team on 01296 468 483 or email info@orangegenie.com

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