Autumn Budget - Will IR35 reform be announced for the private sector on 22nd November?
With the impending Autumn Budget speech getting ever closer on 22 November 2017, talk of IR35 reform being introduced into the private sector is widespread, but what can contractors do to safeguard their position?
Qdos have always been of the opinion that the rules should not stop genuine contractors from operating outside of IR35, and since the rules were introduced in April this year, have worked with many public-sector bodies and agencies to ensure that contractors can continue to do so.
Mel Stride, the financial secretary to the Treasury, who was recently interviewed by the Financial times, said that it was now “an issue of fairness,” in determining whether IR35 reform in the public sector should be aligned with the private sector. It seems that the Government are geared up to make this change.
Unlike HMRC’s CEST tool which has recently been subject to much criticism, (because it disregards a key status test, despite being laid down in case law), we believe in reviewing each case on its own merits, considering all of the facts and specific circumstances and then making an informed decision based on those individual facts. Issuing blanket IR35 determinations as we’ve recently seen with the NHS, is unfair and has resulted in legal action being taken against them.
What to do if IR35 reform in the private sector is announced
- Start a dialogue with your end client and agency about IR35.
For any contractors operating in the private sector who are concerned about reform, talking to the end client directly about IR35 status is extremely worthwhile. This will help to ensure that there is a mutual understanding regarding tax status and working arrangements. In the event that there is a lack of understanding, by raising the issue with the end client now, it could provide that extra time to rectify matters and ensure that going forwards, a parity of understanding exists.
- Encourage your end client/agency to speak to Qdos
Some of the agencies/end clients which ultimately made use of Qdos' compliance system for managing the public sector reform and therefore applied the rules fairly and accurately, were referred to Qdos by their contractors. Due to the manner in which the public sector rules require IR35 to be assessed, the contractor has very little say in how their IR35 status is determined - but informing your agency/end client that there are solutions available from IR35 experts like Qdos, may ultimately mean that your client doesn't make blanket rulings and you are able to continue operating outside of IR35 (providing this is the correct status for your engagement).
- Consider your tax status
A detailed review of your IR35 status will highlight any specific areas which might need to be addressed. Having a review might give you the confidence to continue, with the knowledge that you are genuinely operating outside of IR35, fortified with the evidence to back this up.
Properly considering tax status now could be considerably helpful if you are required to explain why you consider yourself to fall outside of IR35, either to the end client, or in the event of an IR35 enquiry. If private sector reform goes ahead, the liability for IR35 falls to the agency or public sector body themselves, however for contracts undertaken before the date of implementation, the risk of enquiry remains.
- Take the CEST tool
Although we would advise not to rely on HMRC ‘s CEST tool exclusively, undertaking a test alongside a review from an independent IR35 expert such as Qdos, could also be a valuable exercise. If reform is introduced into the private sector and all the signs are that it will, many end clients are likely to make use of the tool to assist in making the necessary determinations concerning tax status. So using the tool in advance could give you an indication of what your result will/should be.
If you have any queries regarding the off-payroll working rules for the public sector or potential reform to the private sector, whether you are a contractor, agency, or engager, please get in touch on 0116 269 0992 or [email protected].