As 2019 draws to a close, this signals to recruiters and PSCs that we are now in the home stretch when it comes to preparing for the forthcoming reforms to IR35. From April 2020, PSCs working in the private sector will no longer be able to determine their own IR35 status; this will instead fall to the recruiter or end hirer.
The changes are being introduced by HMRC in order to tackle false self-employment, meaning that some PSCs may be operating under their own limited company to gain the tax benefits that this will hold, despite the fact that they are operating in exactly the same way as an employee would.
These reforms will mean some significant changes are on the horizon for the way in which both PSCs and recruiters operate alongside one another, and therefore ensuring that adequate preparation has taken place is vital.
The changes have been much debated over the past few years, in large part due to the issues that came from their introduction to the public sector back in 2017. Inadequate preparation by businesses, an uncertain understanding of IR35 in the first place and unclear guidance from HMRC led to a number of tribunals and contractor walk-outs.
This time around, the government has carried out a thorough review of the reforms and how they will impact the public sector. This included a consultation, held last year, as well as a review of its infamous CEST tool, that aims to help businesses determine the correct IR35 status.
Whilst this has been the source of much anxiety for the contracting and recruitment community, those that are truly operating outside of IR35 should have no reason to worry. For those businesses operating with PSCs and are uncertain, they must ensure that they refresh their knowledge on IR35 and are confident in their decision, as they will be liable for missing tax should an investigation by HMRC find them in breach of the legislation.
Is your agency struggling to get to grips with IR35 legislation? Contact the team at Exchequer Solutions today for guidance.