Q. My client in the private sector had initially placed me and all contractors it engages inside IR35 prior to the anticipated rollout of IR35 reform in April of this year. However, after the 12-month delay was announced, this decision was deferred until further notice. While this was a relief, I’m under no illusion that my client is likely to reinforce this blanket IR35 decision in the next few months. I know I’m not alone here. Any help on how I could potentially change my client’s mind would be much appreciated.
A. First and foremost, it’s important that you make it clear to your client that a blanket IR35 decision – where all contractors are forced inside IR35 without ‘reasonable care’ – is non-compliant. And, in theory, according to the IR35 legislation, the end-client will become liable for IR35 should HMRC learn that a business has adopted this approach.
However, role-based decisions, which occur when a business has carried out grouped IR35 assessments involving contractors with identical terms and conditions, are in keeping with the law. So needless to say, it’s vital that you’re able to recognise a blanket IR35 decision (non-compliant) from a role-based determination (compliant).
One potential way of doing this is speaking to fellow contractors working in different roles and checking the Status Determination Statement (SDS) that you will be provided with by your client. If these are identical then you may have been subject to a blanket assessment.
As you may be aware, HMRC has devised a ‘client-led disagreement process’ which, in the taxman’s eyes, is how contractors should challenge inaccurate determinations. However, as you may have gathered, this is a process led by the client, who effectively holds all of the cards. Given the jury remains out on whether this process will have much – if any – positive impact, you have a handful of options.
Consider joining together with fellow contractors who find themselves in your position and approach your client as a group to outline the reasons why they should rethink their stance. While this may still fall on deaf ears, by teaming up with other contractors it could potentially make a difference. Having your IR35 status reviewed by a third-party could also prove important in showing to your client that your contract belongs outside the legislation.
If this fails, you could consider revising your rates, taking into consideration the tax that will be deducted by your fee-payer. We are aware this is far from ideal, but it’s an avenue to potentially explore should all others fail.
While these are uncertain times for contractors, Qdos is supporting over 2,200 businesses with their IR35 preparations, which in turn will ensure tens of thousands of fair and accurate status assessments. In recent months, as we close in on 6th April 2021, we have experienced a significant increase in the number of firms taking a measured and pragmatic approach to IR35 reform and one that allows genuine contractors to be engaged outside the legislation.