With reforms to IR35 legislation imminent for public sector contractors, independent contracting is facing a major challenge. Contracting expert Dave Chaplin, CEO of Contractor Calculator, has authored a new book that offers recruiters, public sector end-clients and contractors the specialised knowledge that they need to remain compliant and avoid protracted HMRC investigation.

The book (Beat IR35: The Ultimate Guide to IR35 for Contractors, Agencies and Clients) offers:

  • methods to ensure that public sector contractors remain outside IR35
  • ways to prevent the new reforms from resulting in additional costs
  • clear advice concerning what exactly places a contractor inside IR35
  • a comprehensive guide for recruiters, contractors and public sector end-clients

During the consultation process, numerous industry experts condemned the proposed changes as unfair and unworkable. Critics included Umbrella Company trade associations the Freelancer and Contractor Services Association (FCSA) and PRISM, contractor body the Association of Independent Professionals and the Self-Employed (IPSE) and recruitment trade associations the Association of Professional Staffing Companies (APSCo) and the Recruitment and Employment Confederation (REC).

Despite these objections, the Government decided to press ahead with the changes, which have placed the contracting supply chain under threat as never before, according to Mr Chaplin.

He explained that freelancers and contractors operating as genuine small businesses are now faced with the perpetual threat of the business-to-business contracts that they have entered into freely with clients being re-categorised by HMRC officials as “employment.”

Emphasising the labyrinthine complexity of IR35, Mr Chaplin stated that it could only be applied correctly by an expert. A contractor’s ultimate employment and IR35 status, he said, may only be determined after a time-consuming Revenue investigation and tax tribunal.

He added: “Due to this uncertainty, come April, if risk averse public sector clients or their agencies default to deciding that all contractors are inside IR35, this leaves contractors paying considerably more tax. I have written this book to help all those who could be affected by IR35 to stay on the right side of the taxman.”

Recent research by the FCSA, however, points in another direction. Despite new restrictions on tax relief on travel and subsistence (T&S) expenses, Umbrella Company Employees working in blue-collar, industrial, construction and education sectors have seen an increase in demand for their services.

Commenting on the findings in December, FCSA CEO Julia Kermode said that the abolition of T&S relief has proven much less damaging than anticipated. Significantly, she added that with the IR35 changes planned from next April to go ahead in the public sector, it is heartening news for Umbrella Companies that they can still be the preferred mechanism for hirers who would prefer to avoid getting IR35 status wrong.

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