Chancellor Philip Hammond announced that 2018's Autumn Budget will take place on Monday 29 October. This is an earlier budget than we hoped for; it hints that changes to IR35 in the private sector are imminent. It was late November ‘16 when the public sector changes were announced and many complained they were not given enough time to prepare. If the changes go ahead in April 2019, this will give companies an additional month to get ready.
What happened in the public sector and what does this mean for the private sector?
In the public sector, the client must tell the recruitment business whether a contractor falls inside or outside IR35. If the client says a contractor falls inside IR35, the recruitment business must deduct tax and NICs from the payments it makes to the contractor’s limited company. This is a very basic summary, but the key point to note is that the client is involved in the decision-making as to whether a contractor falls inside or outside IR35.
The industry predicts that these changes will be applied to the private sector, possibly as early as April 2019.
What should you do now?
Keep taking IR35 advice. Most contractors are familiar with getting their contracts reviewed, but an IR35 investigation is likely to look beyond the contract to “what went on in reality?” For that reason, you should ensure that your contract reflects how you work day to day with the client. Sit down with the client and document their view on your working practices. Do they match your “IR35” contract? Do they know about the existence of your substitution clause and accept that if you wanted to, you could send someone else in your place?
To support you further, you can complete our IR35 Working Practices Review Form. We will give you our opinion on whether you fall inside or outside IR35. You can also take this to the client and use it as a way to document their views on your working practices. Do they agree with the statements we made on your working practices? If so, politely see if the client is prepared to sign a short statement to that effect.
Keep taking IR35 advice. Most contractors are familiar with getting their contracts reviewed, but an IR35 investigation is likely to look beyond the contract to “what went on in reality?” For that reason, you should ensure that your contract reflects how you work day to day with the client.
This is likely to help you in two main ways. Firstly, if you are ever subjected to an IR35 investigation, you’ll have all your paperwork and supporting evidence to hand. The client’s sign off will add a strong defence to your case and just might stop the investigation in its tracks. Secondly, as and when the changes to IR35 happen in the private sector, you’ll have a file full of evidence as to why you genuinely fall outside IR35 that you can present to the client. If the client has already agreed that you fall outside IR35, it may have less appetite to later say that you fall inside IR35.
Our service
Our IR35 review services are designed to help you, the recruitment business and client assess IR35 status. We gather detailed information on our contractor’s circumstances via our IR35 Working Practices Review Form and review the contract(s) in place. If you need an IR35 review or want more information on IR35, please take a look at our webpage or email us at IR35@paystream.co.uk.
Our IR35 review service is available to both PayStream and non-PayStream accounting customers.
