Why Preparing for IR35 Reform is Harder than You Think

IR35

It’s becoming common for recruiters to underestimate the amount of work involved in assessing IR35 status correctly, and by extension how long it will take.

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Many recruiters and clients believe they can assess the status of each role, rather than individual contractors. This would mean, for example, that if you engage thirty contractors doing the same job, you’d only have to complete one assessment rather than thirty. It would also mean that assessments could be completed far in advance, as soon as you knew the details of the role and if necessary, before the contractor has been recruited.  

We can understand why recruiters might think that, and it would make a number of things easier if it were true. Unfortunately, the reality is more problematic.

 Why individual IR35 assessments are required for each contractor

The contract and the job description are not the only factors that determine IR35 status. The individual contractor’s circumstances and working practices are important as well. It’s quite possible for two contractors who are doing the same role on paper to be treated differently under IR35 because they work in a different way. It’s therefore not possible to assess IR35 status by only looking at the role because each contractor’s situation must be considered.

This is reflected in the public sector legislation, which is clear that blanket decisions based on the role do not fulfil the requirement for “reasonable care”. For example, when NHS Improvement advised trusts that all agency nursing staff could be assessed as inside IR35, this was challenged and withdrawn in the light of the need for reasonable care in assessing IR35 status. We can expect the same requirements to exist at the private-sector rollout in 2020.

As individual assessments are completed, patterns will begin to emerge and experience will suggest the likely IR35 status and risks associated with a particular role. This will allow you to advise your clients in a broad sense, and to manage contractor expectations, using this experience to predict the likely outcome. However, this outcome will be affected by each contractor’s individual circumstances, and individual assessments will still be necessary.

 How much time have you got?

When it comes to assessing IR35 status, viable shortcuts are few and far between. It’s a complex and involved undertaking and it requires specialist expertise. Even the CEST tool provided by HMRC needs to be handled with care, may not give you accurate results and can’t be used to replace a full, individual assessment.

It will take time to implement the necessary processes to ensure you’re assessing IR35 status correctly. Failing to do so leaves you at risk of either falling afoul of the legislation, or unnecessarily increasing costs and sabotaging your ability to source key skills.

The necessary processes need to be in place before affected contracts are signed, so for 6-month contracts you really need to be ready now.  

Where to go for help

Orange Genie Compliance will help you and your clients design and implement robust processes to help mitigate the risks without causing delays or disrupting your supply chain. Contact us as soon as possible to ensure the necessary processes can be implemented in time.

You can reach our expert team on 01296 468483 or email compliance@orangegenie.com.

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