IR35 changes take effect in private sector

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Changes to the off-payroll working rules – known as IR35 – take effect in the private sector today (6 April).

It means that the responsibility for determining the employment status of a contractor will shift to the organisation using their services.

The rules apply to all medium and large-sized private sector firms, as well as all public sector authorities.

Dave Chaplin, CEO of contracting authority ContractorCalculator and assessment tool IR35 Shield, estimated that 60,000 businesses, 20,000 agencies that supply contractors and 500,000 contractors will be affected by the new legislation.

Although businesses have had several years to prepare for its introduction, an IR35 Shield survey earlier this year found 52% of contractors were yet to be assessed by the organisation they provided services for.

“The dust will settle and businesses will soon recognise the off-payroll bogeyman for what it is. Once some begin to test the water by engaging limited company contractors, others will undoubtedly follow, not least because the flexible workforce is the bedrock of UK plc and the UK economy,” said Chaplin.

“I would urge contractors to hold their nerve and for those hirers who are not prepared, it may be prudent to terminate or pause any existing contracts with contingent workers immediately and then start assessing them before they continue their work.”

Seb Maley, CEO at IR35 specialist Qdos, said that businesses have gotten on board with the changes in recent months.

“The tide has turned, with thousands of businesses now aware of the fact that IR35 reform is manageable. These firms, who have prioritised compliant IR35 status decisions and will continue engaging contractors, are set to gain a huge advantage over those who have banned contractors because of the changes – a short-sighted and totally needless decision,” said Maley.

“Despite IR35 reform and the problems the changes create, I am optimistic about the future of contracting. The economic climate, the changing makeup of the workforce and the growing demand for flexible, skilled and cost efficient workers suggest contracting is here to stay in spite of these changes.”

Chaplin recommended that organisations and contractors work together to ensure their working relationship remains “outside-IR35” by: assessing IR35 status comprehensively; ensuing the contractual terms align with the relationship; agreeing and signing a Status Determination Statement; ensuring the engagement operates in alignment with the original intent; and monitoring and collating supporting evidence throughout the contract.

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