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What the Consultation on IR35 Reform Means for Recruiters

IR35

On 5th March2019, the government published the second consultation on the extension of IR35 reform into the private sector. The consultation asks for views and information on the impact on non-corporate engagers, information requirements and addressing status determination disagreements. The government is very clear that no alternative solutions will be considered; in other words, the reform would go ahead in April 2020.

How to Help Your Clients Prepare for IR35 Reform: A Recruiter's Guide: Click here to download

Due to the unexpected and unprecentented advance of the COVID-19 virus, implementation has now been delayed until April 2021, but the government is still determined to implement the reform, and all stakeholders still need to prepare. 

Industry concerns about private-sector IR35 reform

Industry commentators have a number of concerns, and some have expressed frustration at HMRC’s continued insistence that reform has been largely successful in the public sector. Evidence of widespread non-compliance by public-sector bodies and staffing issues on public-sector projects has been consistently ignored. Many are predicting chaos and lasting damage to the economy when the much larger and more diverse private-sector is subjected to the same pressures.

Moving forward

Whether we agree with the basis for reform or not, and whether we support the proposed solution or not, it’s coming in April 2020 and the challenge now is to prepare your business and your clients to protect them from any fallout. We’ve been waiting for more detail about what the form will look like, so what does this latest document tell us?

Your responsibilities as the “fee payer” 

Where the end client determines the contractor is working inside IR35, the party who pays the contractor’s PSC, the “fee payer”, will be responsible for calculating the necessary “deemed employment” tax and NIC deductions, and for paying the employer’s NICs. This responsibility will usually fall on the recruiter. You will have to decide if you’re going to charge your client more to cover the employer’s NICs, or if you’ll cover it out of your own margin.

Your client’s responsibilities as the engager

The end client will be responsible for making IR35 status determinations, and for passing that information down the supply chain to you and the contractor. They’ll also need to provide the reasons for their decision “when requested”.

Determining IR35 status is a complex and often subjective matter, requiring considerable resources and expertise. Each engagement needs to be assessed individually, taking into account the details of the contract and the contractor’s specific circumstances and working practices. Blanket decisions are not a safe response, and even the government’s own CEST tool is not reliable enough to save engagers any time. Your clients will need help to put the necessary processes in place to protect their business while keeping their supply chains intact, and they’re likely to look to you for that help, as their trusted recruitment experts.

The update to CEST

HMRC’s online Check Employment Status for Tax tool is widely regarded as unfit for purpose, and not reliable enough to be used in place of a full IR35 status assessment. While HMRC continue to insist that the tool is accurate, they have promised to improve it to make it suitable for use in the more diverse private sector. We can hope that they will use the opportunity to bring CEST in line with case law, but at this point confidence in the tool may be too low for it to be truly useful. However, your chosen compliance expert may be able to recommend an alternative employment status tool.

Where to go for help

Both you and your clients will have new responsibilities and potential liabilities under the reform, and will need help to prepare. There is no “one size fits all” solution, and our advice is to involve compliance experts like Orange Genie Compliance as soon as possible so they can assess your needs in time to implement the necessary systems and processes.

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

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