Outside of Brexit, IR35 is the buzzword in the UK at the moment. As you’re no doubt aware, the UK Government is proposing that the public sector changes to the IR35 rules are rolled out substantively in the private sector from 6 April 2020.
It means that responsibility for deciding IR35 status lies with the ‘client’, not the ‘contractor’. Due to the lack of clarity surrounding who falls in scope and falls outside it, IR35 has been a cause for panic. However, our Chief Financial Officer (CFO) David Laing has worked closely with government and regulatory experts and carefully scrutinised IR35 Regulations to form a clear view of the way ahead. Here he explains why there no longer needs to be any unnecessary cause for concern.
Who will shoulder the tax liability?
For contractors working outside IR35, the good news is they have no tax liability from April 2020 onwards. If HMRC challenges a determination, that liability (assuming the ‘client’ isn’t negligent) falls on the ‘fee payer’.
101 Ways is unequivocally a consultancy firm that provides services; we are categorically not an ‘agency’ supplying staff. This distinction is crucial as it means we are the ‘client’ for IR35 purposes as well as the ‘fee payer’.
In the case of an agency supplying staff, then it is up to the ultimate client to make the IR35 determination. This potentially opens them up to risk as they must ensure that they perform proper due diligence to determine the correct status of each worker the agency supplies. In the event that HMRC successfully challenges a status determination, it is 101 Ways that would be liable. This means that we can protect both our current and prospective clients / contractors during any engagement with us.
How will we ensure ongoing compliance?
Firstly, we have a long-term relationship with Bauer & Cottrell, one of the most experienced advisory companies when it comes to IR35 – who will continue to provide technical IR35 advice.
Secondly, we are also in the process of evaluating a number of robust IR35 compliance solutions, which will provide everyone in the contractual chain – clients and contractors – with a detailed IR35 determination setting out exactly how we arrived at our results.
What’s 101 Ways’ experience of IR35?
When it comes to IR35, I have has a vast amount of experience. Prior to joining 101 Ways in January 2019, I worked as CFO for a large technology consultancy for over seven years, during which time the Public Sector IR35 rule changes came into effect in 2017. That consultancy had over 250 contractors working directly with HMRC and I was instrumental in the government department accepting that all of them were working outside of the scope of IR35.
We have also seen in the latest Digital Outcomes and Specialists (DOS) 4 Framework – the agreement that helps the public sector buy, design, build and deliver digital outcomes by finding appropriate specialists to deliver agile software development – that the public sector is very aware that service-based contracts for highly skilled IT professionals fall outside IR35. Notably, this is also a DOS contractual requirement for every role provided under the Framework Agreement.
What makes 101 Ways best placed to face the IR35 changes?
We have audited our business model and can guarantee it is solid and allows our consultants to be engaged outside IR35. We have a huge amount of in-house experience in this area but are also engaging with professional service firms to provide additional levels of assurance and protection around contracts and working practices.
Further, the new compliance tool (once chosen) will provide evidential confirmation that all roles are outside IR35 and will be circulated to both our clients and contractors for added peace of mind.
We want to help remove the fear and confusion surrounding these changes and will continue to update our clients and contractors as events unfold up to the 6 April 2020 and beyond.
Want to find out more?
We’ll be running a series of events in London and Manchester for hiring managers if you’d like to discuss the changes in person and hear more from David and the other experts.
If you’re a hiring manager and would like to attend, please register your interest here and we will be in contact with further details.