Although the IR35 (off-payroll) reforms have been postponed until next April, it’s never too early to start preparing. The earlier your agency begins preparations, the better positioned you’ll be next year to avoid compliance headaches.
As we all know, liability for determining a contractor’s IR35 status and taxing them correctly will now fall to the end hirer (unless they’re ‘small’), though HMRC will often collect unpaid taxes from employment agencies. This leaves you open to two key risks:
1) End hirer makes an ‘outside’ IR35 decision
While continuing to engage ‘outside’ contractors where possible is ideal, it’s also a risk for your agency if HMRC challenges the status successfully.
To mitigate this risk, prepare your contingent workforce by making them aware of the reforms and conducting robust and insurable assessments. Starting now will give you time to amend contractors’ working practices or contracts, so they can continue operating ‘outside’ compliantly.
2) End hirer makes an ‘inside’ IR35 decision
Newly ‘inside’ contractors will have to accept lower take-home pay, or you’ll need to pay them more to retain them, this presents the risk of a dissatisfied contingent workforce.
If valued contractors are newly ‘inside’, preparing early gives you time to contact them, understand whether they’re likely to move elsewhere for an ‘outside’ contract, and be the agency to help them find an ‘outside’ role before April 2021. This will prevent you from losing talented workers.
While there are risks associated with the reforms, these shouldn’t be your focus. Instead, use your knowledge of IR35 as an opportunity to attract new business.
As the saying goes, knowledge is power. Working knowledgeably and in an organised manner with your supply chain will give you a competitive advantage by highlighting your business as a source of clarity amid the complexity.
Demonstrate to end clients that you understand the challenges they’re facing, and propose effective solutions, such as:
- Assessing their workforce – end hirers risk losing resources or paying increased costs for newly ‘inside’ contractors. This can be planned for by identifying resource gaps early, changing arrangements, communicating with contractors, and quantifying costs.
- Providing SDSs – providing an SDS and ensuring it’s passed along the supply chain correctly is complicated. As it’s the end hirer’s responsibility to produce the SDS, demonstrating you understand the risks, and providing hirers with an efficient, reliable, and insurable assessment tool should help you win business.
- IR35 complexity – IR35 is complex, but with early preparation, you can proactively speak to customers, answer their questions and educate them on how to keep talented contractors working compliantly. Plus, having greater involvement with clients now means contracts can be reviewed and working circumstances adapted to increase chances of an ‘outside’ IR35 determination.
Although identifying these risks is important, if you begin preparing early, you can take advantage of the complexity of IR35 by approaching end hirers and contractors from a position of knowledge – answering their IR35-related questions and providing solutions to their problems. This will highlight your agency as a trusted thought-leader.
JSA can help you create an action plan for working with your contractors and end hirers to manage the IR35 reforms. Get started with a free sample assessment to view a snapshot of your likely situation come April. JSA can then help develop and implement effective solutions tailored to your individual concerns.
Whether you’re looking for an efficient and insurable assessment tool, alternative working options for newly ‘inside’ contractors, or detailed advice on managing the complexity of IR35, JSA can provide the tools and expertise you need.