It is now three months until the new IR35 reform come into effect in the private sector. The government has just announced a review of the implementation draft proposal for the IR35 status review. As such, we thought this was an appropriate time to outline what we know so far. Particularly with regards to the incoming IR35 reform and how this will impact our contractor clients so that they can best prepare for the IR35 reform.
However, in the meantime we cannot establish why companies are making changes. We have seen companies say they only want staff now. This is fine if they make contractors staff themselves and provide them with all the perks of staff. However, contractors will likely be considerably worse off, regardless of how this is done (via a recruitment agency or directly).
What we are seeing is that companies appear to still want the flexibility for hiring and firing contractors, but don’t want them on their own payroll. Instead they are telling contractors to go staff with a recruitment agency (which could be a huge detriment to them) but the end user keeps its flexibility of having contractors. This could potentially be to cap the rates as they may see a lot of work coming. But they are jumping the gun as there are no changes yet and the final legislation isn’t in place.
Perhaps they don’t understand that there are no basic changes to IR35 coming – maybe they are panicking – maybe just using it to their benefit – we have no way of knowing. Normally, with every cycle in the oil Industry, we see companies try to tempt contractors to staff positions before they get busy to keep their rates lower. But the changes they are trying to make do not make sense as there has been no change to the criteria determining if a contractor is inside or outside.
On the other side, we have had conversations with a couple of companies who are actively working to make sure all their contractor contracts and working practices are compliant with IR35 as they actively wish to keep contractors. We suspect that these companies will do well after any changes as they will have the pick of the best contracting talent out there.
We have also been in touch with the local MP Andrew Bowie. Andrew is asking for a review by the government as he sees the detriment of the changes to the local economy. A number of MP’s have lobbied the government on this subject.
We cannot know the reasons for companies to be acting as such. Nevertheless, it does not change the course of action that you should be taking now. We have outlined our advice below.
This is a very unsettling time for everyone. We all look forward to a final decision on how and when this will be implemented. At least then the Insurance companies can come out with their new products.
In the meantime our advice remains the same. In order to prepare for the IR35 reform, get your current contract and working practices reviewed now. You will then have a good, strong, outside IR35 review. This can then help to argue your case with the engager/end user, should that be necessary. However, if the end user decides on an internal policy change regarding whether they wish to stop using contractors, and only use staff or agency staff, that is outside any IR35 Assessment Review by HMRC and the Government.
One word of caution, we are seeing some up-selling of other Insurance Policies and other products e.g. CV Consultation Services. There is no basic change to IR35 so you should not need any of these – if in doubt, feel free to contact us.