Don’t bury your head in the sand on IR35

Since the government announced the public-sector changes to IR35 would be rolled out to the private sector, employers have been wondering what this means for them.

IR35 was introduced nearly 10 years ago to combat what HMRC calls ‘disguised employees’. In order to enforce this regulation, public sector organisations have, since 2017, been obliged to decide whether their contract staff fell into the IR35 bracket and deduct PAYE & NICs accordingly.

This obligation will fall on private sector companies in April 2020.

What’s going on in your contractors’ minds?

If you have workers in your business that are contracted through limited companies but work exclusively for you, these changes are likely to affect their take-home pay and increase their NIC liabilities. They are therefore likely to be assessing their options.

With IR35 looming, expect your contractors to be considering permanent employment opportunities where they would be eligible for holidays, sick pay and other employment rights. Or they could look to split their work between different organisations to remain outside the IR35 bracket. Many of their options have a direct effect on their continued work with you. So, it is important to engage with your contractor base early.

Assess your contractors’ IR35 status

Identify critical staff and talk through their options. If you believe they do not fall under IR35 it is important that both you and the contractor collect evidence that they are not treated like employees in case of HMRC investigations.

To make this assessment you can use HMRC’s online assessment tool. However, this is not compulsory – you can use whatever assessment method you feel is appropriate, but if you miscategorise a worker that is subsequently found to be subject to IR35 HMRC can recover the PAYE and NIC contributions from you.

So, don’t delay too long, or you may find you lose key members of your team to decisions made without your input.