Most industry observers are practically certain that public sector IR35 reforms will come to the private sector, possibly next year. Qdos Contractor, a leading tax advisory service for contracting professionals, has offered a series of steps to ensure the that the reforms are managed properly should they arrive in the private sector.

As in the public sector, the reforms shift responsibility for setting the employment status of contacting workers from the individual freelancer to the engaging company. Errors in this determination would leave private sector firms liable for any shortfalls in tax and NICs.

Qdos Contractor’s CEO, Seb Maley, offers the UK’s 5.5 million private sector firms (and the recruitment consultancies working with them) five ways to manage the reforms.

  1. Collaborate throughout the contractual chain

Maley emphasises closely analysing the factors necessary for an accurate IR35 determination. It is vital, he says, that each of the parties involved in the contractual chain contribute their input to this process. Accurate IR35 claims are impossible, he warns, “without input from the company, the worker and when involved, the recruitment agency.”

  1. Be realistic about IR35’s foundation in case law

The example of the public sector showed that much misinformation arose in relation to IR35, leading some public sector bodies to make hasty blanket determinations with no basis in case law, Maley notes. Crucially, he advises against relying unduly on HMRC’s heavily criticised CEST tool, which has in fact contributed to a raft of inaccurate IR35 determinations. He adds, “It’s important to remember that this tool is not mandatory.”

  1. Begin preparing now

Numerous errors regarding IR35 determinations in the public sector arose from a lack of time, Maley observes. This wasn’t helped by lack of guidance from the HMRC; many PSBs simply didn’t realise the scale of the task ahead of them. With private sector IR35 in the pipeline, Maley advises, “…[P]rivate sector companies and agencies must begin preparing well in advance of the legislation actually being enforced. Engaging with contractors is a vital element of this.”

  1. Link together with the wider market

The errors arising in the public sector mustn’t be repeated, Maley warns, underlining the need for each party in the contractual chain to co-operate with each other to manage IR35 if it comes to the private sector in 2018.

  1. Get specialist advice

Reminding future hirers of the sheer complexity of IR35 and the likelihood that they will have little experience or existing resource for making well-informed determinations, Maley urges them to take the safest course of action for ensuring accuracy: “engage a third party specialist.”

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