Following the Treasury’s announcement to defer off-payroll working legislation until April 2021, we’ve already seen a significant number of end-clients re-engaging contractors and consultants outside IR35. It’s great news, but you must tread carefully.
The short version
You need to take personal responsibility for your status – and take this seriously. Now’s the time to get your contracts and working practices reviewed by a third-party expert to be confident that you’re outside IR35. We recommend Kingsbridge Contractor Insurance – and have done for many years. For £199.50 per year, you get unlimited IR35 contract reviews AND IR35 insurance – that includes £100,000 of legal defence costs, and £100,000 of cover for tax liabilities.
On 17th March, the Treasury announced that they would defer the introduction of off-payroll working legislation for a year. This means that the current rules, where PSCs determine their own status, will remain in force until April 2021. Already a number of large clients have embraced this deferral and have started re-engaging contractors outside IR35.
If you find yourself in this position, consider the last few months a warning: don’t rest on your laurels, work hard over the next 12 months to build a strong outside IR35 position.
Sharpen your focus: you must take personal responsibility for your IR35 status
Remember, the rules that determine your IR35 status have not changed, nor were they due to. This means that you still need to be aware of your IR35 status, and given HMRC has flashed their aggressive hand, it’s more important than ever to be confident of your IR35 status.
Do not fall into the false temptation that you can return to business-as-usual, and carry on contracting as before. The last few months have shown just how important it is to have a robust and defensible position if you’re operating outside IR35.
If you’re amongst the 50% of the contracting population that has previously taken your IR35 status seriously and used a third party to support you, then brilliant – you’re doing the right thing. If not, now is the time to sharpen up on working practices, call in an expert and build your own confidence in your status: do not expect a soft-landing from HMRC in 2021.
Remember – you are now still responsible for and liable for your IR35 status.
What if your client determined you were inside IR35?
If your client determined you inside IR35, now is the time to step back and understand why that was the case. If they’ve provided you with an SDS, examine it and look to see where your opinion differs from theirs. Similarly, if you have a copy of CEST questions where you disagree with the answers, this is a good starting point.
This is an uncomfortable read, but now is the time to be honest with yourself. If your client determined you inside IR35, is it realistic that you were inside IR35 all along? How much strength is there in your counter-argument? If you think you may have been a “strong inside” case all along, you may wish to consider moving to a new client. Come April 2021, HMRC won’t have much patience for incorrect determinations, so do consider this carefully. The risk to you will be significant.
If, on the other hand, your client determined you inside IR35 but the case was more marginal now is a really good opportunity for you to build a stronger outside IR35 case. Look at areas of weakness in your determination and take remedial action where you can. A good starting point is this article on IR35 – you’ll find advice on how to determine status, and tips on keeping evidence:
PSC bans or seriously flawed determinations
Finally, if your client’s determination was simply crackers (as a few were) or they banned PSCs, please don’t just dismiss this and return to how you were working. As above, use this as an opportunity to build confidence in your status.
Call an expert for help
We cannot recommend enough that you engage a specialist IR35 assessor to support you. It’s a competitive market, and the fees are low – you’d be mad not to work with a specialist.
As a way of background, we’re an accountancy firm that specialises in supporting contractors and consultants, and we’re founded by former contractors and consultants with many years of IR35 experience. We’re trained and approved by IPSE to offer IR35 reviews. But even given all of this, we don’t offer an IR35 review service! That’s because IR35 is a complex subject, and it’s about law and working practices, not accountancy. In addition, as an accountancy firm, it’s unlawful for us to sell or bundle tax liability insurance. We strongly believe that the best option for contractors and consultants is to use a third-party assessor AND to take out IR35 insurance.
That’s why we’ve always signposted our clients to other experts to help with this. We’ve worked with Kingsbridge Contractor Insurance for many years, and we’ve always been impressed with their service. For £199.50 per year, they will provide you with unlimited contract reviews as well as providing you with IR35 insurance, which covers defence costs, as well as any tax liabilities. Find out more here.
We’re here to help you with your PSC accountancy, regardless of your IR35 status. Our online accounting app allows you to manage contracts outside and inside IR35, using both the existing (deemed salary) rules and the upcoming off-payroll rules. In addition, we’re currently working on Statement of Work features for those who operate using this model. We don’t offer umbrella services directly (it’s not our passion), but if you need one now and again we’ve negotiated a discount with a leading provider. Explore our service here.