The most recent developments - pencilled in to be applied from April 2017 - which puts the engager (or agency) in control of the contractors’ IR35 future - are clearly cause for concern and not just for public sector contractors, but possibly for all private sector contractors too (as suggested in the IR35 consultation last year).
The new guidelines proposed would give engagers the responsibility of deciding whether or not the contractors they use are IR35 compliant or not. They could be required to complete a new online tool, similar to the Employment Status Indicator (ESI) tool currently on HMRC’s website, to determine whether or not IR35 applies to them.
From our experience over the years of dealing with various clients and agencies, this could be problematic, both for the contractor and the engager themselves. Public sector bodies, and agencies who have not needed to care about IR35 in the past, would now need to take an active role in determining whether the Intermediaries Legislation applies to each contractor. It is likely that engagers will take the easy way out, and simply apply IR35 or stop using limited company contractors as part of their flexible workforce altogether. Contractors will also likely be deterred from taking contracts where IR35 is forced upon them.
It is clear to see that contractors are not pleased with the proposed changes; here are some of the comments we received in response to the question, “How do you think the proposed changes will impact your business?”
It is not just contractors that are concerned about the new guidelines, if this was to be implemented across the board, it could prove burdensome for engagers and agencies alike. We will not know which way it will go for sure until the Autumn Statement 2016.
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