The clock is ticking for agencies in their efforts to prepare for upcoming reforms to IR35 legislation, which will impact a significant number of recruiters come April 2020.
These changes will affect medium and large businesses, who will be required to make the decision on a contractor’s IR35 status from April, whilst contractors working with small businesses will still have their say on their position inside or outside of the legislation.
Countless businesses and contractors will be impacted by the reforms, but the recruitment industry in particular, will have to change their processes to ensure compliance, as they will ultimately be liable for any incorrect decision.
HMRC has recently published draft legislation outlining details of the reforms, and one major change that agencies will have to complete when working with a contractor is a ‘status determination statement’. These statements will be a requirement under IR35, and will need to be submitted following every IR35 decision, to the contractor themselves and the organisation paying. It should clearly outline their reasoning behind their conclusion of a particular status.
As we have seen with reforms to the public sector, many contractors have been unhappy with the status that has been determined by businesses, this has led to walkouts for a number of organisations. The draft legislation has also introduced a disagreement process for those contractors who disagree with a decision. Agencies will have 45 days to analyse and respond to any disagreements under the reforms, with their response outlining the reasons for this decision.
Consequences of incorrect decisions
Not only will agencies and end hirers be liable for any missing tax and NI contributions should they make an incorrect decision, but they also run the risk of being taken to a tribunal by contractors unhappy with their loss of income if they are deemed outside of IR35. This situation has been seen over the past 12 months with public sector contractors, and therefore it is vital that agencies understand IR35 legislation and how to put it into practice correctly.
The Exchequer team have been working with agency partners over the past few months to provide our expert knowledge and guidance on IR35, contact our team today to find out more about how we can support you.