Despite the ongoing IR35 consultation and the Government’s insistence that further reform is merely a ‘possibility’ and not set in stone, contractors, private sector businesses, and recruitment agencies, are readying themselves for an announcement this year.
Should IR35 reform be unveiled in the Autumn Budget this November, the chances are that private sector companies and agencies will only have up until 06th April 2019 to prepare for the arrival of the new rules.
Private sector businesses have never needed to set the IR35 status of the contractors they engage, nor settle up with HMRC for any missing tax following an IR35 investigation. So the task that looks increasingly likely to be presented to 5.7m private sector companies is huge, with massive financial implications should they get things wrong.
HMRC’s recent victory against BBC presenter, Christa Ackroyd, just goes to show how expensive setting an incorrect IR35 status can be. The former ‘Look North’ presenter was deemed to owe HMRC £419,151 in missing income tax and National Insurance Contributions.
In the near future, these fines could be passed on to private sector companies, as is now the case in the public sector.
Exclusive research by Qdos Contractor reveals the extent of contractors’ concerns. Just 5% of 1512 UK independent workers are confident the private sector is prepared for potential IR35 reform, leading you to question whether end engagers are actually capable of making accurate status decisions on scale.
A telling 74% do not think their private sector clients and the agencies which place them are ready to do so, while 21% are unsure – and it can’t be said that simply not knowing is much of a vote in confidence.
Understandably, contractors do not want to be wrongly placed inside IR35 as a result of their client protecting its own liability. And the blanket IR35 determinations made in the public sector following reform last year is perhaps another reason why they are so concerned.
Just as contractors gear up for the likelihood of further IR35 changes, the private sector must start preparations too. Should end engagers assess their current ability to make well-informed status decisions now, and not in a frenzied rush in the weeks before potential reform, the upheaval caused by changes to the IR35 legislation could be kept to a minimum.