Implications of Off Payroll Working ( IR35 )

What this could mean for you

 

by | Jan 29, 2020

In Summary

There has been much attention drawn to the changes happening on 6 April 2020 for IR35. The Revenue is looking to harmonise tax paid by contract staff when they are essentially working as employees of companies on a largely full time basis.  In particular, changes effect who is responsible for deeming the status of a worker’s status. 

All public sector authorities and medium and large-sized private sector clients will be responsible for deciding if the rules apply.

If a worker provides services to a small client in the private sector, the worker’s intermediary will remain responsible for deciding the worker’s employment status and if the rules apply.

HRMC

What does this mean to you?

There are a number of scenarios and possible outcomes to this new legislation.  It is possible that contract staff will need to review the length of time they spend as a contract member of staff on  projects. Alternatively, some staff may consider a move to a permanent position within their existing organisation. Some may elect to follow compliance using a financial mechanism jointly with the Revenue and employer. Recruitment agencies are busy considering the implications and currently there is large amounts disruption in firms.

Substitution Clauses are critical areas to consider in contracts. Certain clauses will cause the Revenue to immediately deem the status of individuals. For example, a simple clauseuch as ability to ‘interview’ a substitute contract member of staff will cause a contract to fail assessment.

It is prudent for both employers and contract staff to review their options and to investigate potential routes in a timely manner.

Alternative approaches could be to consider working with Software Engineering Development Companies. Such companies can offer solutions and capabilities that meet all of the Revenue requirements. This can be often be cost neutral to employers needing to bring projects to market and can avoid the issues associated with IR35.

LDN Labs is a typical example of such an organisation who have been offering services in this manner to a number of Institutions and Fintechs in London. Sprint based delivery of solutions are often comparable to contracting staff on a direct comparison basis but with all the upside of working with another company. Companies such as LDN Labs can also offer additional  capability as they have a team of people with a diversified skills base that can bring additional breadth and depth to organisations .