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Should I be concerned about IR35 changes in my profession?

Q. I’m an IT Project / Programme Manager contractor who is highly concerned about the IR35 changes the government are looking to make in the private sector. I’ve spent a considerable amount of time thinking about the proposed changes and discussed my concerns with my accountant on numerous occasions. I always get my contracts reviewed by an IR35 specialist (QDOS) to ensure their compliant with being outside of IR35. However, I’m in two minds as to how concerned I need to be.

On the one hand I feel that as a Project or Programme Manager contractor I should be ok to continue working outside of IR35 as I work on solely project work which has a defined start and finish as well as defined deliverables. When the project/programme is finished I leave the company and move onto another contract unless there’s another project they want me to pick up. To me, this is clearly different compared to a contract support engineer who works on BAU technical issues – sometimes for years at a time as part of a BAU team.

On the other hand I wonder if I will be caught by IR35 changes regardless as I have to follow the client’s governance delivery framework to ensure in-house compliance is met. However, isn’t this true of getting a builder to build a house as rules, regulations and client requirements need to be met? I’m also part of the client’s in-house project management team doing the same work as the person sat next to me – albeit without the benefits or permanent employment.

Therefore, my question is, how concerned should I be about the proposed IR35 changes in my profession? Are all contractors at the same level of risk of being caught by IR35 reform or are certain contractor professions at more risk than others?

A. It’s important for any limited company contractor to consider their IR35 risk. IR35 is not trade specific and the application of the legislation is always considered on a case by case basis.

Whilst it is positive to have clear deliverables for defined periods, there are so many other status tests to consider in order to provide a balanced opinion.  Additionally, having to follow the client’s governance delivery framework to ensure in-house compliance is met, is not conclusive and may be perfectly acceptable but it does depend on the specific circumstances.

Our advice would be not to get too concerned just yet about the potential changes to IR35 reform in the private sector. There were no decisive measures within the Spring Statement and as we are still awaiting the consultation document, at the moment we can only speculate on what the changes would be.

In the meantime, there are some steps you can take to understand your risk and prepare for any changes:

  1. Whilst we don’t recommend utilising HMRC’s CEST (Check Employment Status for Tax) tool to ascertain your IR35 status as it is not fit for purpose, running through the tool may give you an idea as to how your end client may find your status with regards to IR35 after such changes – should the reform mirror that in the public sector. Please note that your end client may not answer the questions in exactly the same way.
  2. Evaluate your financial situation in the event that you were placed inside IR35 – your accountant should be able to help you with this. This will enable you to assess the viability of working in such a way should you be required to, and help you determine the contract rates which might be acceptable to you following any such reform.
  3. Having your contracts regularly reviewed is a good start in ensuring compliance with regard to IR35, but having your working arrangements reviewed alongside the contract is highly recommended, as this will help to provide a much clearer opinion of your employment status.
  4. Opening a dialogue with your agency/end client is always useful. They may not be fully prepared to start thinking about potential changes just yet, but particularly following the consultation release and any subsequent announcements, it can help reduce any stress if your agency/end client is communicating with you.

It would certainly be worthwhile ensuring that you have a clear idea of where your status lies and if you’d like to have a discussion with a member of our Consultancy Team, please don’t hesitate to contact Qdos on 0116 269 0992.

By Contractor Doctor

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