IR35: Practical Tips for Freelancers & Contractors

The IR35 legislation impacting the private sector from April 2021 is dramatically changing the landscape for freelancers and contractors engaging with recruitment businesses and hirers. The new rules can be very confusing so we have put together some practical tips to help you navigate the next few months and help you move forward with clarity and confidence.

Education is key

Educate yourself on the rule changes and what it means for you. Ensure you obtain enough knowledge to hold constructive conversations with hirers, potential hirers, and recruitment businesses. It is important that you also understand their concerns and appetite for risk. Our IR35 Plus web page has numerous useful guides to help you.

It is critical to engage with your hirer and recruitment business now

Engage with your hirers and recruiters now and use your cumulative knowledge to influence how your hirers can react to the changes. Leaving this to another day may well result in it becoming too late for you to influence some decisions relating to you.

Understand how your potential hirers and recruiters plan to deal with the changes and what solutions they have that can help you. Other freelancers and contractors will also be doing this so compare notes with similar contractors to yourself where possible.

It is important that you understand and try to influence how your hirers and recruitment businesses plan to adhere to the rules. For example:

• Have they identified if you will need an IR35 determination, and can you help influence their decisions?
• Is the hirer a small company and so falls outside the new IR35 rules potentially leaving you free to remain contracting through your PSC:In the Companies Act 2006, during a 12-month period, a business is deemed to be a ‘small’ company if it meets 2 or more of the following criteria:
  • Turnover – not more than £10.2 million
  • Balance sheet total – not more than 5.1 million
  • Number of employees – no more than 50
• Have they identified if you are likely to be ‘inside IR35’ or if you may need changes to your working practices, and what does this mean for you?
• Have they considered the impact on your pay rates if considered ‘inside IR35’ and how can you, your recruitment business and your hirer work together to create a win win scenario?
• Can you challenge the status determination, and if so what is your hirer’s process and timing for doing so?
• Have your hirers assessed the optimal timing of moving freelancers and contractors to different contracting solutions where contractors are considered ‘inside IR35’?
• If considered “inside IR35” do you understand the consequences of using solutions that are high risk or new to the market and untested, and the risks of those solutions being challenged by HMRC?

You need to understand now if any of your hirers or recruiters still have no plans in place and what this means for you, and how you might help them to help you on a timely basis.

If they have no plan now, this will most probably result in issues for you later down the line.

To avoid serious difficulties as you approach April 2021 it is now critical to implement your own plan as soon as possible to navigate these changes. We can help you with this.

The additional key tips to consider at this point are as follows:

• Understanding employment status determinations.
• In these financially difficult times, make sure you assess the financial strength of your umbrella employers.
• Finding the best fit employer Umbrella Company for you.

In the next blog, we’ll address how best to manage these key areas for your future contracting.