IR35 changes: what to make of the upcoming Government review

Miles Stribbling talks about how Brexit and IR35 affect the digital skills shortage.

Miles Stribbling writes about the Government’s review of proposed IR35 changes.

With the April deadline for changes to IR35 legislation rapidly approaching, HMRC has launched a review of the proposed changes to off-payroll working rules.

Indeed, HMRC has pledged to deliver a ‘smooth implementation’ of the revised legislation. While this can be considered a positive step, it leaves little time for companies to act after the review.

The confirmation of the review has left many observers questioning both the value and time frame of the process. Many contractors and third-party community representatives have expressed strong feelings that the review does not leave enough time for the Government to act on the findings, particularly given the changes apply to payments made on or after April 6th. This means that work completed in March will be affected by the changes, literally days following the completion of the review.

Miles Stribbling, Consultant at Hudson RPO, explores the latest IR35 changes, and what they could mean for your organisation.

 

Will IR35 be delayed until 2021?

It is important to note that the announcement of the review reinforced the April 6th date several times. It stresses that the review will focus on the implementation of the changes.

IR35 changes January updateApart from a possible further tinkering of HMRC’s online assessment tool, called CEST, and the arranging of a number of roundtable discussions, there is little belief that the Government will make any fundamental modifications to the proposed changes.

Perhaps the best that can be hoped for, is a further delay until 2021, which would ‘allow the Government to include a full impact assessment of the IR35 changes already in place in the public sector’, according to Recruitment and Employment Confederation (REC). It would also ‘allow the government to regulate umbrella companies’, the REC says.

 

IR35 creating a talent flight risk

With a backdrop of Brexit and an ongoing skills shortage, there is a potential for the changes to make a bad situation worse. While many companies are struggling to attract the required skills for major digital transformation projects, the changes to IR35 could possibly drive off-payroll workers to seek employment abroad where the same skills are in high demand.

A recent survey carried out by the Association of Professional Staffing Companies (APSCo) reported that 79 percent of the professional recruitment firms polled believe that most of the businesses they work with are aware of the incoming changes. Meanwhile, 51 percent said the majority of their clients are actively preparing for the updated legislation (Executive Grapevine).

I’ve written previously about how companies are beginning to change their policies in light of IR35. There are a number of options available to contractors, from converting to a PAYE worker to remaining outside of IR35, and others. There is middle ground in the majority of circumstances, and the key to success is finding it.

A quick reminder:

The new rules make companies responsible for assessing whether a contractor should be considered a full-time employee in the eyes of HMRC, bringing them in-line with the public sector. Previously, it was up to the worker’s personal service company (PSC).

From April 6th, the party which pays the contractor will be required to operate PAYE or NICs as appropriate, making the hiring of contractors less attractive to medium to large businesses, which are affected by IR35.

 

Preparing for IR35: our recommendations

While the various recruitment industry and contractor representative bodies continue to appeal to the Government for further changes and a delay, our recommendation is to be informed, be prepared, and take action.

Despite the ongoing HMRC review, a thorough assessment of all off-payroll workers should be completed. By doing this, clients should be be prepared ahead of the deadline and contractors will feel engaged and less likely to seek work elsewhere.

With the above in mind, Hudson RPO are global leaders in recruitment process outsourcing and managed services provision. Since 1999, customers have trusted us for innovative, customised recruitment outsourcing and talent solutions. Hudson RPO have an exceptional ability to source and hire candidates with hard to find skills on behalf our clients. We also support our client with IR35 and SoW solutions. Our approach is highly consultative, professional, and, above all, honest. We may not have all the solutions to the challenging times ahead, but we would welcome the opportunity to talk to you to see how we can help.

 

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