With the IR35 review open and the introduction of reform to the Off-payroll working rules less than three months away, 1,500 businesses impacted by the legislation have shared their views on the incoming changes.
The research, conducted by IT consultancy, Be Digital UK, whose clients include the Cabinet Office and the Department for Workplace and Pensions, offered valuable insight into how companies are preparing for IR35 reform.
That over a third of companies are not aware of incoming reform at this stage in the proceedings is worrying, explained Be Digital UK’s spokesperson, Richard Tyler: “The results of this research clearly highlight the need for businesses to gain a much broader understanding of what the upcoming IR35 (reform) means and how it will affect their company.”
Voicing similar concerns was Qdos CEO, Seb Maley, who encouraged private sector firms to get to grips with the legislation immediately: “The clock is ticking towards 6th April and given the lack of any meaningful help from the Government, it’s vital that companies equip themselves with the skills and expertise needed to make accurate IR35 decisions before reform lands.”
Approximately 4 in 10 businesses intend to review their strategy around engaging contractors as a direct result of changes, with 11% stating they will likely reduce contractor numbers. That reform could deter firms from engaging contractors is a concern regularly expressed by the likes of IPSE, whose Deputy Director of Policy, Andy Chamberlain, has previously said: “Now, as April 2020 approaches, major banks and businesses – vital drivers of the UK economy – are starting to panic at the plans to extend the changes to the private sector. Some are even telling their contractors they must join as employees or stop working for them altogether. Out of fear of these changes, they are destroying their flexible workforce.”
In preparation for 6th April, around one in five businesses affected by the reforms have apparently drawn up a Statement of Work (SoW) with their contractors. An SoW is typically in place between a consultancy and its clients. Among other details, it outlines project length, fee, deliverables and timescales. With an SoW in place, the provider of the service will decide the IR35 status of the contractor placed, not the client.
While Be Digital UK’s Richard Tyler said “acquiring services using outcome-based SoW’s is a sensible way of reducing risk”, Seb Maley of Qdos did point out that contractors should think carefully about working under one: “Drawing up an SoW is a decision that contractors mustn’t take lightly. The SoW must be genuinely outsourced and not merely a provision of labour masked as a consultancy agreement. Needless to say, HMRC is aware of any ‘workarounds’ to the incoming changes.”
Nearly half of the businesses surveyed said they were ‘concerned’ about what action to take next. According to IPSE, indecision stems from the complexity of the IR35 legislation, which has been criticised for being confusing and ambiguous to the extent where HMRC itself cannot understand it.
IPSE’s Andy Chamberlain said recently: “If HMRC, with all its resources and expertise, cannot make an accurate IR35 determination, how can it expect anyone else to get it right? The Government must urgently reconsider any proposals to shove responsibility for determining IR35 status onto end-clients.”
Finally, nearly one in three businesses believe IR35 reform is fair. As Be Digital UK puts it, these businesses are of the view that the “changes proposed in IR35 are a positive step in ensuring fair pay and taxation implementation on UK contractors.”