IR35: The risks of a blanket decision and how to avoid a talent shortage post April 2020

With the industry braced for the autumn budget on the 6th November, private sector organisations have little over 6 months to get their IR35 strategy in place or face financial risk and a shortage of contract talent. Many businesses are only just starting to wake up to the work required to continue to use contractors compliantly due to private sector IR35 reform in April 2020.

Our compliance and assurance director, Phil Beardwood, was this week featured in industry-leading publication Personnel Today, discussing why it is irresponsible for organisations to panic and try to mitigate risk by cutting corners and taking a blanket approach to IR35.

In April 2017, the government amended existing IR35 legislation so that public sector organisations employing contractors working through limited companies – meaning they pay less tax and national insurance – would now be responsible for deciding whether they were inside or outside of IR35.

Genuinely self-employed contractors are deemed to be outside, but if you are considered insideIR35, HMRC expects you (and your employer) to pay the same tax and NI contributions as other, permanent employees.

From April 2020, these rules extend to the private sector – and as recent headlines have shown, a number of organisations have opted to avoid the risk altogether by just demanding everyone goes on the payroll. Now that the onus is on the employer, rather than the contractor, to ensure they’re paying the appropriate level of tax, it’s understandable that they want to mitigate any risk. But we can learn much from public sector experiences. Phil Beardwood, compliance and assurancedirctoratMorsonwarns:

“The public sector’s cautious approach to IR35 by deeming entire contractor populations as inside only created further problems, with many contractors quickly leaving their roles to pursue other assignments – and often with competitors – or pay rates increasing considerably in order to retain their services andskillsets” - PhilBeardwood, Compliance Director, Morson

A recent survey by contractor accounting firm Brookson found that three in five private-sector contractors will consider working elsewhere if they are found to be inside IR35.

Read the full article on Personnel Today https://www.personneltoday.com/hr/ir35-can-private-sector-employers-get-their-houses-in-order/

So what can you do to prepare effectively for IR35 and ensure you feel comfortable to continue to engage a contractor workforce post-April 2020?

Morson and our expert IR3 5partners have a wealth of experience in dealing with IR35 matters across the public and private sector. To support you in the lead up to (and following) the April 2020 off-payroll changes, Morson has exclusive partnerships with specialist contractor services company, Champion Contractors, and Top 40 UKlawfirm, WeightmansLLP, both of whom have significant experience in helping businesses navigate the changes to how IR35 is applied in the public and private sector. Together we can help you undertake a full review of your contractual workforce.

To ensure your business is prepared well in advance of the changes, contact the team at IR35@morson.com or check out our I R35 Hub.