Is my client’s IR35 assessment now worthless?

Q. What does the last-minute delay to IR35 reform mean for the determination my client made? I have been placed inside IR35 by my client – a decision which I was intending to appeal – however, do I need to do this now, given reform will not be enforced until 2021? 

A. While contractors will continue to decide their own IR35 status for another year, in this scenario, we would advise that you speak directly to your end-client. You don’t necessarily need to appeal the status determination (given the responsibility will stay with you), but having already assessed your IR35 status, your client may want to ensure you are working compliantly, regardless of the fact they won’t hold the IR35 liability until next year. 

If you feel that your contract has been unfairly placed inside IR35, you have every right to provide amendments to the contract and tell them you belong outside the rules. But while your client can’t dictate your status, they can decide whether to engage you or not. 

The IR35 rules and key clauses – Substitution, Mutuality of Obligation (MoO) and Control – are still applicable irrespective of whose responsibility it is to determine status. To be confident that your contract is genuinely outside of IR35, you should ensure that the day-to-day practical working arrangements under which the services are supplied, also remain outside of IR35. 

Whilst this change in direction is great news, we can appreciate that many contractors have unsuccessfully pleaded their case and taken on contracts inside IR35 or have looked for contracts elsewhere. However, since the delay was announced, a number of private sector firms have already performed an IR35 U-turn. You could argue, are these end-clients opening themselves up to tax investigations? Why didn’t they offer roles outside IR35 at the beginning? Why did some blanket assess?

In our professional opinion, this delay will at least relieve the pressure felt by most agencies and end-clients. It will allow them more time to understand IR35, implement clearer processes and equip themselves better. 

So to conclude, for one more year you can continue to decide if the service you provide private sector clients reflects self-employment or employment. If you have been placed inside IR35, this status determination doesn’t stand, meaning you do not need to formally challenge it under the Client-led dispute process. Whether your client will continue to engage you outside IR35 after having placed you inside the rules, however, is another question altogether.

This answer was provided by a specialist Integro Accounting accountant.