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IR35 Reform: What to Look for in Your Clients

IR35

If you’ve carefully arranged your contracting business to ensure you fall comfortably outside IR35, the reform coming in April 2021 may be making you nervous. Given that your client will be responsible for determining your IR35 status, the danger that they won’t do so correctly is large in many contractors’ minds. Those who have a choice will obviously prefer clients who can reassure them, but how can you tell if a prospective client might help you work outside IR35?

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Already taking action

Most end clients have never had to deal with IR35 before, which means they have a considerable adjustment to make in terms of new systems and processes, as well as educating their internal staff. With only a few months to go, you can reasonably expect those preparations to be well underway, and for staff involved in hiring contractors to be aware of them. As a minimum, hiring managers should know about the reform and be able to discuss the client’s process for assessing IR35 status.

Individual IR35 status determinations

The client’s process should include individual IR35 assessment for each contractor. There are many factors that can affect your IR35 status, and your individual circumstances and working practices must be taken into account. A “role based” assessment, which would cover all contractors performing the same role, may be included as part of the process, but assessment should not stop there.

Limited reliance on CEST

The Government’s own online status tool, Check Employment Status for Tax (CEST) is widely considered to be unfit for purpose and should not be relied upon in isolation. Even so, some clients may still want to use it because if its “official” status as HMRC’s own tool.

Given that HMRC’s promise to stand by the results of CEST has also proved unreliable, we would hope to see it only used in conjunction with other means of assessment, including independent expert opinions. Other, far more reliable status tools are available, and we expect to see well-informed end clients opting for those instead.

Communication and collaboration

You may not necessarily be involved in the decision making process, but the client will need information from you and will therefore need to secure your co-operation with their process. As their preparations proceed, they should be sending regular updates to contractors, so you know what’s happening and what action you need to take.

You might also see them collaborating with IR35 compliance experts like Orange Genie. This is a sign that they’re taking their preparations seriously and are willing to devote the necessary resources to them. The involvement of compliance experts also makes it more likely that the client will be able to safely engage contractors outside IR35, because they’ll have access to the expertise they need to make adjustments to contracts and working practices.

What to do if this isn’t happening

If your existing client is not apparently preparing for IR35 reform, the best course is to talk to them about it. You may find that they have plans to start preparations in the new year, but it’s also possible that they didn’t know how urgent the issue is. For many businesses, hiring contractors is a small part of what they do, and they may not be aware either that reform is coming, or what its effect will be when it comes in.

A well-informed client is likely to want to engage contractors outside IR35 where possible, as this is the most cost-effective way to access the skills they need. It follows that the best defence against bad practices may be to ensure that your clients are well informed.

If you have 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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