IR35 private sector roll out: what can businesses do to prepare?
Samantha Hurley, director of operations at APSCo and Co-Chair of HMRC’s IR35 Forum.
There was a collective sigh of relief across the recruitment profession when Philip Hammond announced that IR35 changes would not be extended to the private sector until April 2020. A decision, he admits, which was made after ‘listening carefully to representations’. I’d like to thank the 143 APSCo members which took the time to feed into our official consultation response, as well as all those from across the recruitment sector who provided individual responses: the vast majority, if not all, stressed that timing issue was a primary concern.
However, while this more favourable timeframe does offer businesses a little breathing space in order to prepare, we are advising our members to act now to ensure that they are ready in time for roll-out.
While there are a number of details which remain unclear surrounding incoming changes to IR35 in the private sector – such as whether consultancy/outsourced arrangements will continue to be out of scope – we do now know that the new system is due to go live in April 2020.
Organisations should begin by reviewing their existing contingent workforces to determine what employment models individuals are working through to understand the extent of PSC contractor usage. Recruitment firms should engage with their clients to discuss which roles are likely to be in scope across different levels, and if workers with these skills are thin on the ground or easily replaced – forewarned is forearmed.
Following changes to IR35 in the public sector, research from APSCo found that 45 per cent of members had seen contractor rates rise since the new rules were introduced, with 46 per cent of these witnessing increases of more than 15 per cent. With this in mind, businesses should look at staffing budgets and workforce plans carefully to project where there is room for manoeuvre. This will not only allow for contractors upping their day rates to mitigate a drop in take home pay, but also a possible increase in permanent headcount.
Recruitment firms should also get the ball rolling as soon as possible on ensuring IT systems and internal processes are in order, to cope with the new rules. The implementation period for a new IT system and associated back office processes is conservatively 12 months, and that is before taking into account that most existing payroll and invoicing payment systems which are commercially available do not extend to processing PAYE to a corporations (i.e. personal service companies). Organisations will also need to educate their own teams and the companies they provide contractors to on the changes, as well as upskilling those who will ultimately be responsible for status determinations.
While a consultation is due in the Spring, and draft legislation isn’t expected to be published until the summer, if we’ve learnt anything from the public sector roll out, it is that it’s never too early to begin preparations for what will be a significant and arduous period of change.”