With changes to IR35 in the Private Sector looming, there’s no better time to arm yourself with our free FAQ’s, Guides and Video guidance that you can reference whenever you need.
There will be a number of impacts upon recruiters who supply contractors. Firstly, and amongst other things, those recruiters are likely to see their clients looking to them for advice and support regarding their new obligations and those recruiters without the necessary knowledge to support their clients will have to find that expertise elsewhere (Brookson Legal can help). Secondly, recruiters are quite likely to see some of their contractors, particularly those who have scarce skills and who are deemed to be “disguised employees” by their hirers, seeking improved day rates, which might lead to a squeeze on agency margins. And thirdly, agencies will need to watch what comes out of the 2019 Consultation regarding their obligation to follow the end hirer’s determination of the contractor’s employment status (for tax); the Public Sector rules leave some wriggle room for the agency to ignore the Public Sector hirer’s determination and make their own assessment – there is a good chance that that wriggle room will be closed off in the Private Sector rules.
Well, there is clearly the commercial risk and challenge that derives from a change in the rules. Your candidates will have questions regarding their IR35 status and your clients will want you to help them with the compliance challenges that the new rules present. Brookson Legal can help with both of these.
In addition, there is the legal risk. There has been much publicity, quite rightly, on the hirer’s obligation to employment status test contractors, and on the tax risk they assume if they do not do this with reasonable care. However, the legislation still says that it is the fee payer (which will usually be the agency) who must deduct the correct Income Tax and NICs. So does that mean that HMRC might pursue the agency, if it considers that incorrect Income Tax and NICs have been deducted, even where the agency has followed the instruction of the hirer (who has acted with reasonable care)?
The answer is possibly, yes. Although HMRC have looked to move compliance to the hirer, and although it is the hirer who has the reasonable care obligation, the Public Sector legislation does not say that an agency which has followed the hirer’s instruction is in the clear. This doesn’t appear to be in the spirit of the legislation, and perhaps this year’s Consultation will pick up on this point, but as currently legislated the fee paying agency also has a risk.
Most importantly, agencies should be helping to get their clients ready. If clients, and agencies, know early on how many contractors will be affected and what the size of the challenge is, they can prepare for April 2020 in a rational and commercial manner, avoiding knee-jerk reactions and bad decisions. Knowing where change is required will enable agencies to work with their clients to put in place a plan and processes that will allow both parties to know and understand those roles that are caught and not caught; agencies will then also know where there is a requirement to deduct PAYE and NIC and where contracts have to be changed.
Written by our experts, these guides will give you the tools to understand the implications of IR35 as a contractor, recruiter or hirer and help you prepare for the upcoming changes in 2020.