IR35 legislation has been the subject of much consternation within the contracting community, since changes introduced in April 2017 for the public sector meant that it was down to the client to determine IR35 status rather than the contractor themselves.
Over the past few weeks a number of businesses and organisations within the public sector have come under fire for wrongly determining a contractor’s IR35 status by making blanket decisions rather than assessing on an individual basis. This has led to many contractors choosing to take the matter to a small claims court to claim back income lost from these inaccurate decisions.
For clients and recruitment agencies that have failed to accurately determine the IR35 status of contractors they engage with, this could ultimately mean they are liable for substantial pay-outs through the small claims process.
There are in fact some big public sector names that have been revealed as some of the top offenders of blanket IR35 decisions, including the NHS, the Ministry of Defence and, astoundingly, HMRC. Research revealed that four in ten contractors working within public bodies had been assessed universally rather than individually, with 19% of these contractors engaged with HMRC.
These findings are particularly troubling in light of the possibility that IR35 reforms will be extended into the private sector, which could come into force as early as April 2019. If a blanket approach is taken in the private sector, then due to the volume of PSC’s in use, this could have an enormous negative impact on the working practices in the UK.
Subsequently it is vital that all businesses engaging with contractors must refine their IR35 decision-making process so that it is accurate.
Our team here at Exchequer Solutions invest a great deal of time in supporting the agencies and contractors we work with to ensure they understand IR35 and are compliant at all times. If you are unsure of IR35 and how it impacts you, get in touch with our team today to discuss.