OFF-PAYROLL (IR35) REFORMS UPDATE

The reforms to off-payroll working the private sector were due to be outlined in the Autumn Budget on November 6th, but that has now been delayed.

Until the formal announcement is made, all we can do is wait, and make you aware of the potential implications. Whether you’re a contractor or a recruiter, it’s important to understand what the reforms mean, how you might be affected and what your options are.

Fortunately, after 20 years in the industry, we are well placed to provide support and advice, not least because we worked through the same legislative changes when they were introduced in the public sector back in 2017. Our in-house expertise is now supplemented by that of our parent company, JSA Group, where Chris James, Chairman of the FCSA, is Head of Accounting Operations.

Off-payroll reforms – contractors

The priority for contractors who operate through their own limited company, or PSC, is to understand how their end clients intend to manage compliance, if the reforms are introduced. We are already seeing movement in the financial sector, where several major banks have announced their intention to discontinue their use of PSC contractors, and now we’re seeing moves in the construction industry too.

Contractors who can no longer operate through their PSC will need to look at their options and possibly go onto PAYE as an employee, or use a compliant, FCSA-accredited Umbrella company such as ourselves. Find out more about what to do if you’re affected by the off-payroll reforms.

Off-payroll reforms – recruitment agencies

For recruiters, the reforms highlight the need to understand and manage relationships within the ‘supply chain’. This is because the reforms focus on the assessment of IR35 status, with liability flowing up and down the supply chain. Liability will move down the supply chain if HMRC is unable to collect what it considers to be unpaid taxes.

So, an agency or intermediary could be liable, even if it can prove it followed the correct procedures regarding IR35 status checks. This is a significant headache for all recruitment agencies.

Of course, this emphasises the need for correct assessments, but this is complicated by the fact that even the Government’s own assessment tool (CEST) has a poor reputation for reliability.

Recruitment agencies need to:

• Talk to clients (end engagers) to find out what they intend to do with their contractors.
• Decide if they can do IR35 assessments, or if they need our help.
• Find out what clients intend to do with rates if engagement models change.
• Ensure contractors understand the rules – we can help.
• Determine if contractors have previously had their status assessed, and whether they would accept roles under PAYE.

What to do next

We are here to help recruiters and contractors to navigate the off-payroll reforms. Please sign up to our newsletter to keep abreast of all developments, or contact us on 01244 684700 and ask to speak to a member of the Account Management team for more information.