Two days ago (17 March 2020), the government announced that it would defer, but not cancel, the IR35 changes in the private sector until April 2021.
This is to reflect the challenging economic environment as a result of the coronavirus (COVID-19) pandemic. The delay means that the current rules which exist in both the public and private sectors will continue to apply up to and including 5 April 2021.
This blog is designed to bring you up to speed with all you need to know about the delay and developments around IR35 in the private sector, offering you the benefit of REED’s expertise and experience to support you through these changes and beyond.
What you need to know
The IR35 reforms significantly impact the way organisations engage contingent labour. The legislation is designed to ensure contractors operating under Personal Service Companies (PSCs), who would otherwise be classed as employees, pay broadly the same tax as employed workers.
Despite the change of date, the government are very clear that they are still committed to these reforms next year, but the deferral gives businesses more time to prepare for these changes, given the current pressing issues.
What you need to do
Private sector organisations do not have to do anything yet. PSC contractors will remain responsible for assessing IR35 and for making tax and national insurance deductions accordingly up to and include 5 April 2021. REED will continue to pay PSCs gross.
Public authorities should follow the rules which took effect in April 2017, and remain in place. The additional requirements around having a Status Determination Disagreement process, cascading Status Determination Statements down the supply chain, and additional liabilities, which were due to come in are now not expected to be legislated until April 2021.
For status determination statements: as contractors working in the private sector remain responsible for managing IR35 until April 2021, determinations received will not be used by REED. For those who wish to continue to test roles in the run up to April 2021, we can facilitate recording these for clients so that they are already in place for next year.
Clients who decided to not use PSCs, and require contractors to work via PAYE (whether agency or umbrella) will wish to decide whether to continue with this policy, or allow PSCs back. Many organisations are choosing to stick with their policies which have been worked through already, rather than reversing them out for a short period of time, only to put them back in again.
Contracts: REED will continue to use the contracts we currently have with clients and contractors alike. We will release the new contracts and manage the transition to those contracts ahead of April 2021.
Supporting you through the changes
Having successfully rolled out the public sector reforms and developed our systems to manage this change effectively, here at REED, we remain well placed to support you through these changes over the next year. For instance, we are releasing the REED IR35 Indicator to help our clients determine if a role is ‘inside’ IR35 in a fast, simple and effective way to support planning and decision making for April 2021.
To help you prepare your business for this change, we would love to offer you a free IR35 readiness consultation through our specialist consultancy business, Consultancy+. This option has helped many of our existing clients, and offers a menu of services to help support and implement your strategy, including:
- Planning and strategy workshops on managing the changes and making determinations
- Option appraisal around commercial and operational approaches to mitigate and manage risk
- Business case formation
- Programme management and implementation of management strategies
- Supplier management models and service triaging function
If you are interested in find out more on how REED can support you with the IR35, contact your local consultant.