The lack of an announcement on IR35 reform in the private sector may have provided some comfort to those watching November’s budget speech with baited breath. However, a rollout to the private sector is still a possibility, and a consultation on the issue of non-compliance is expected shortly, which the government say will draw “on the experience of the public sector reforms.”
Following last April’s changes in the public sector, which saw the responsibility for the assessment of employment status shift from the contractor to the end-client, HMRC say they have seen increased compliance.
Therefore, many believe that a private sector rollout will be the government’s next step; a case of when it will happen, not if.
Lessons learnt from the public sector experience
As an end client in the private sector, how should you approach assessing your workers ahead of the potential changes? Well, here’s what we’ve learnt from the public sector reform:
- Don’t believe everyone will be ‘caught’ by IR35 – Whilst we know that there will undoubtedly be cases of non-compliance, even HMRC acknowledge that there are many highly skilled freelancers and consultants who are compliant by operating ‘outside’ IR35.
- You don’t have to use the CEST tool to make your decision – HMRC’s CEST (Check Employment Status for Tax) tool is voluntary. There are doubts over its validity. You can use it, but you can also use alternative assessment methods; consider appointing an independent expert for assessing your freelance workforce and individual assignments.
- Avoid blanket IR35 rulings – Each assignment should be assessed on a case by case basis. Whilst we have witnessed enforced blanket bans on limited company contractors and blanket decisions on ‘inside IR35’ status, you must take reasonable care with each assessment. Always speak to an expert if you’re unsure.
Don’t leave it too late
Of course, we’ll have to wait and see what happens. However, if the new off-payroll rules are to be implemented in the private sector, it’s believed that the earliest announcement would happen in the November budget, with a rollout date of April 2019 at the earliest, giving only a matter of months to prepare once the decision is announced.
That’s why we believe it’s important to start thinking about this now. Those involved in off-payroll working, including consultants, agencies, and end clients should be reminded to take stock in order to avoid a last minute panic.
Respond – The government is launching a consultation document examining a number of options to tackle non-compliance, including the potential rollout of IR35 reforms to the private sector. Publication is expected after the next HMRC IR35 Forum meeting on 21st February 2018, or as part of the Spring Statement on Tuesday 13th March 2018.
In order to tackle non-compliance in the private sector, the government recognise the need to involve stakeholders during the process. They believe ‘it is right to take account of the needs of business and individuals who would implement any change.’
So if the potential changes will affect you, make sure you respond to the consultation and have your say; you could help influence the outcome.
Prepare – If new legislation does come into force, make sure you don’t leave it too late, and seek out expert advice if needed.