The reform of IR35 in the private sector will now take place on 6th April 2021. It will see medium and large businesses become responsible for administering the IR35 rules, while the fee-paying party will be transferred the liability.
In preparation for the original introduction date of IR35 reform (6th April 2020), many hiring organisations had issued contractors with ‘Status Determination Statements’ (SDS), which is a required document that explains the reasons for a particular status assessment.
While reform to the off-payroll working rules has been delayed by 12 months, the SDS’s already issued to contractors may still prove valuable for hiring organisations when the changes are enforced next year.
Meanwhile, for contractors who have received an SDS from their end-client, it could be vital evidence in an IR35 inquiry while the worker retains the responsibility and carries the IR35 risk.
The need for a hiring organisation to provide a contractor with an SDS was to be introduced as part of the reform this April. Despite the delay, hiring organisations will still need to issue them next year when the changes are enforced. Until an SDS has been provided by the hiring organisation, they will be considered the fee-payer and therefore liable for any taxes due.
An SDS could be in the form of a document or an email, but it should be in writing and must provide both of the following:
The hiring organisation must provide this statement to both the contractor and the next party in the supply chain which, in most cases, is the recruitment agency that will likely be the fee-payer. It is worth noting that in longer supply chains, this might not be the case. In this scenario, it will be the next party that carries the responsibility to pass the SDS up the chain until it reaches the fee-payer.
Hiring organisations are asking if an already supplied SDS will still have any value on 6th April 2021, while contractors who have received one want to know if it can be used to strengthen their IR35 position in the next 12 months.
If a contractor who has been issued with an SDS is still engaged with the same contractual terms when IR35 reform is enforced then it may mean there is no need to provide a new one. Given the unforeseen circumstances surrounding the delay to the changes, Qdos will not charge a fee for reassessing contractors who are still engaged when the reform is introduced next year.
However, while the written contract may stay the same and remain in place, there is a possibility that the working practices between a hiring organisation and a contractor have changed over time. Therefore, Qdos will conduct a reassessment free of charge to ensure that the original IR35 assessment is accurate and the SDS is compliant.
For contractors who have recently received an SDS from their client, this document could still be used as evidence that IR35 status has been set with ‘reasonable care’. For this to be the case, we must stress the importance of ensuring that a well-informed status assessment was made originally by the hiring organisation. If, for example, HMRC’s IR35 tool, CEST, was used to determine status, an independent IR35 status review is advised.
To help organisations with this requirement, we have developed an SDS template, which can be downloaded here.
Qdos has a wealth of experience in supporting and protecting contractors, recruitment agencies and hiring organisations with regards to IR35. Our IR35 specialists are uniquely placed to assist with a range of vital services that ensure compliance, minimise risk and offer peace of mind. Get in contact with a member of our team today.
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