With April 2020 clearly on the horizon there is still time to make the necessary IR35 preparations. Here we look at 6 simple steps you can take over the coming months, alongside 6 ways a contractor could be deemed to be caught by the extended IR35 legislation.
6 simple steps to prepare
Avoid relying solely on CEST. It is worth remembering that the use of CEST is not mandatory, and in fact has delivered inaccurate assessments in more than half of cases. And whilst there is a new ‘improved’ version of CEST, independent assessments – which provide much more comprehensive audit trail – are allowed.
Get everyone talking. It makes complete sense to involve all parties in IR35 status decisions. After all, this should provide the most accurate results. Contractor, agency and end client should all feed into the process as soon as possible. Importantly, make sure all parties are aligned in their communications
Advise against blanket assessments. Under the letter of the law, blanket assessments will fall down – as decisions need to be made with ‘reasonable care’. Be wary of role-based assessments as these do not take into account the individual or the unique details of their working arrangements and therefore increases the risk of engagers setting their status incorrectly.
Allocate the right resources. It goes without saying that where you are dealing with medium and large organisations, who potentially engage with thousands of contractors, the need for correct assessments is huge. Such organisations need to have resources in place to manage these changes.
Don’t wait. Private sector companies can protect their liability. By taking the appropriate steps and putting processes in place now to ensure they are capable of making accurate IR35 decisions on a case-by-case basis. If left, rushed or panicked assessments could open up a host of potential liabilities.
Be honest. Ensure you are evaluating what is actually happening onsite or in the workplace, rather than the contractual agreement. Be honest and truthful in all your communications.
6 ways a contractor could be deemed inside IR35
If the contractor can’t provide a substitute to replace them when they’re ill or on holiday. By not being able to have someone who can carry out services when they’re not available, contractors may fail the “substitution” test. However, many industry and technical specialists have skills that can’t be replicated by a substitute.
If the contractor is told what projects they have to do and how to do them. An important element of “control” is that contractors still have a say in the way they work. While the engaging company sets the objectives of the work, they shouldn’t be telling the contractor how to carry it out.
If the contractor is being paid on the basis of time spent. Contractors being paid on the basis of time they spend working, rather than on a project basis, may look more like full time employees in the eyes of HMRC.
If the contractor is given set working hours. Getting told what time you need to be at work and what time you should leave may indicate an employee/employer relationship.
If the contractor only has one client and they work for that client five days a week. There may be exceptions to this rule if the contractor is being brought in for a large project over a short timeframe.
If the contractor attends staff meetings or engagements. Attending team meetings & other staff engagements or eating in the staff canteen could all indicate that a contractor is an employee rather than a contractor.