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IR35 Advice Centre

 

​IR35 Reform in the Private Sector

IR35 Reform in the Private Sector
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Contact Qdos Contractor:0116 269 0999
 
 

IR35 Guidance

 

Off-Payroll Working in the Private Sector

New rules regarding ‘off-payroll’ workers in the public sector came into force on 6th April 2017. The Autumn Budget 2017 announced on 22nd November 2017, included confirmation that the widely expected extension of IR35 reform in the private sector, otherwise known as off-payroll working rules will be considered:

"the government will consult on how to tackle non-compliance with the intermediaries legislation (commonly known as IR35) in the private sector. The legislation ensures individuals who effectively work as employees are taxed as employees, even if they choose to structure their work through a company. A possible next step would be to extend the recent public sector reforms to the private sector. The government recognises the importance of taking account of the needs of businesses and individuals who would implement any change. The consultation will draw on the experience of the public sector reforms, and external research already commissioned by the government and due to be published in early 2018." (Overview of Tax Legislation and Rates, 2017)

Below we outline what we expect to happen, and how to deal with the reform should it go ahead, whether you are a contractor, recruitment agency/recruiter, or end client engager. If you are a recruiter or business engaging contractors, please get in touch.

Contact

 

ir35team@qdoscontractor.com
0116 2690 992

Press Contact

 

Benedict Smith
ben@levo.london / 07341773805

IR35 reform to be consulted in 2018

 

There have been numerous indications that the off-payroll working rules in the public sector will be extended into the private sector. HMRC officials including Jim Harra and IR35 Forum members, and Government representatives including Mel Stride, have suggested that the public sector rules have been successful with minimal if any negative impact.

Since reform was introduced in the Autumn Statement 2016 (following on from the consultations of 2015 and 2016), industry professionals and the contracting community have long deemed the rules as a test bed for rolling out to the private sector as well. With the comments being made by HMRC and Government, and industry opinion that the rules were always going to be extended, it seems that wider reform is imminent.

In the Autumn Budget 2017, we expected to hear of either an announcement for reform or a consultation to extend into the private sector, of which the latter has been confirmed. A consultation document will be published early 2018, and given the scale of private sector reform, it is unlikely for any implementation to happen before April 2019.

Bringing some déjà vu following the IR35 consultation in 2015 and the public sector IR35 consultation in 2016, we look set for yet another year of consultations. That said, private sector IR35 reform will have a better starting point in theory, with the experience of the public sector rules, a completed CEST tool (previously ESS) and finalised guidance.

The red book references "external research already commissioned by the government" which will hopefully provide some objective assessment to the reform's impact on the public sector. However, a consultation insofar has not prevented reform from taking place, and so we should be preparing for reform in the near future.

You can read more about the existing public sector rules here.

What to do if you are an agency/end user

 

With the public sector rules having been implemented a year previous, private sector engagers are in a much better position, with a finalised CEST tool and the experience of IR35 professionals like Qdos Contractor.

For the public sector rules, Qdos developed a compliance management system - the Qdos Status Review - which has enabled a number of agencies and end clients to minimise the disruption of the rules, provide a fair opinion for their contractors, and insure the risks involved. If the rules are simply extended to the private sector, this system will function perfectly for private sector recruiters/engagers as well. Please contact Nicole Slowey on 0116 2690999 to discuss, or email ir35team@qdoscontractor.com

It should also be remembered that reform will be a stressful time for your contractors. Contractors run their own businesses and are used to having control over their tax affairs, so keeping your contractors informed with good communication channels will help the process for everyone involved.

What to do if you are a contractor

 

As with the public sector reform, the responsibility for determining your tax status would be passed on to your end client, and inside determinations would place you onto their or your agency's payroll.​ In some instances, the agency/end user will only accept contractors operating through umbrella companies or other trading styles.

This lack of control puts contractors in a difficult position for 'what to do'.

1. Take the opportunity to voice your opinions when the consultation is published. With enough backlash from the contracting community and private sector businesses, the government may be forced to withdraw any planned extension of the reform. 

2. Opening up a dialogue with your agency/end client for their intentions and understanding is the first step. Your tax status won't be your decision anymore, so speaking with your end user/agency is the best way of determining what will happen and how it will happen.

3. Encourage your end client/agency to speak with Qdos. The compliance management system we put in place requires the end client and agency to be on board with the process, which means whilst it would provide a fair and pragmatic solution to the reform, you can't use it without your client and agency including it into their processes for implementing the rules. A number of the agencies/clients we work with for the public sector have been referred to us by their contractors, so encouraging them to speak to us may help you in the long run.

4. Check your status. Whilst we don't recommend using the CEST tool in general (due to clear biases and purposefully neglected key status tests), it is likely to be the first port of call for many end clients. Using this tool will give you a heads up of what your result will or expect to be (remember that you may have differing opinions on how some of the questions are answered). You may also want to have an independent IR35 contract review completed for the same reasons.

The Company

 

About us

Why Qdos?

 

Qdos Contractor are a leading authority on the IR35 legislation, having handled well over 1,500 IR35 enquiries on behalf of UK contractors since its introduction in 2000. Qdos have been at the forefront of the public sector changes, developing a compliance management process which has enabled over 30 agencies/end clients to minimise disruption, and thousands of contractors to receive an independent and fair assessment of their status. In addition, Qdos are one of the leading providers of specialist contractor services in the UK.

 

Our History

 

Qdos began in 1988 as a tax consultancy business and has grown significantly over the past two decades, providing expert business services, products and advice. Over the years, Qdos has grown in both size and reputation as a trusted contractor insurance broker as well as an expert tax advisor. Our aim is to provide UK contractors with the assistance and service with IR35 issues they need as well as sustaining excellent quality and competitive premiums in the contractor insurance market.

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