The start of April marked 12 months since the government implemented off-payroll legislation in the private sector. Originally planned for the same time in 2020, businesses subject to the updates in IR35 rules were granted a grace-period of one year to get to grips with the change while also tackling the impact of the pandemic.
To assess the IR35 landscape 12 months on from its implementation, contractor insurance provider, Qdos, has worked with contractors to understand the impact of the legislation, and how the land lays for workers who’ll find themselves deemed in or out of scope by any employer they come to work with in the future.
On the surface, the rollout looks positive. Since April 2021, 64% of contractors have been able to secure contracts outside of IR35, which is encouraging, considering this figure is nearly double the number of contractors (35%) who said they had been placed outside IR35 immediately following the reform. And the fact that there has been an 83%surge in contractors being placed outside IR35 is a clear indication that the changes are being managed fairly and compliantly.
Comments from Jonathan Darbyshire, IR35 compliance lead at Morson Group.
IR35 landscape analysis
However, trust in the system remains low amongst contractors. Of those who were determined inside IR35 scope (65%), more than a third (39%) intended to challenge the result. And with just cause. Three in four contractors (77%) reported having had their IR35 status determined when surveyed in the month following the reform, but only 56% of these had received a Status Determination Statement (SDS), despite having an SDS being a legal requirement under the rules.
Predictably, the legislation has forced many to change how they operate, or how they describe the services they offer. 82% of respondents who stopped contracting in 2021 due to IR35 reform, moved to employment or agency temp work, whilst 18% retired. There has also been an 80% increase in the proportion of time contractors spent operating via an umbrella company, when compared with 2020.
To make the process as streamlined as possible for both company and contractor, businesses should be regularly reviewing their procedures to minimise the risk to them should they be found by HMRC to be non-compliant, using whatever tools are available to them.
IR35 Health Check MOT
To ensure your business remains compliant as we look ahead to a future where IR35 will be a staple process, an intricate and more personalised assessment, delivered by an impartial consultant, is recommended. Every business should be regularly reviewing their procedures to minimise the risk to them should they be found by HMRC to be non-compliant.
Any business – Morson client or not – that is unsure of whether it is conforming to the rules around IR35 can speak to experts in our team. Last year, we launched our IR35 Health Check MOT service to support businesses with contingent workforces of all sizes to ensure their contractors have been assessed individually. The service is fully insured against the outcome as it’s backed by employment law experts, not just algorithms like alternative tools available today.
We’ll provide a review of the tools you’re using to conduct an assessment and review all your assessment outcomes, as well as analyse your Agency Worker Regulations and other policies and procedures to identify areas of risk and opportunities for improvement.
Our ultimate aim is to ensure that by using the service, your business continues to provide valid assessments to avoid the financial and reputational risks associated with not meeting regulations, and more than that, ensures you can provide clarity to your contractors at every step of the process. By letting us take on this responsibility, you’ll have additional breathing space to focus on your primary role, and can be confident the outcomes and assessments will be more accurate and considered
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The IR35 landscape will continue to change as businesses adopt more stringent processes, and as candidates take more power into their own hands to determine their ways of working. We’ll help you strike the perfect balance to ensure your business continues to deliver the highest quality of service possible, with a workforce that’s been thoroughly and accurately assessed.
Whether your contractor workforce is vast or tiny, we want to help you avoid the potential mistakes that might be incurred by your business’ individual practices, and offer you total confidence that despite IR35, there won’t be any hurdles in being able to access and utilise contingent labour.
To find out more about our IR35 MOT service please contact, Jonathan Darbyshire at jonathan.darbyshire@morson.com
