April '21 IR35 confirmation

The IR35 reform, which came into effect in the private sector in April 2021, made it the duty of medium and large firms to determine the IR35 status of their contractors. These measures brought the private sector in line with same changes made in the public sector in 2017, and the impact on the flexible economy is very much being felt. But it has been a somewhat staggered implementation period for many.

From the early stages of the proposed changes (late 2019), HMRC insisted there would be a soft implementation period of 12 months to allow end clients and contractors room for error when potentially adjusting their IR35 statuses and understanding the new reform. i.e HMRC wouldn’t come down too hard on clients trying to understand the transition. Many misunderstood this and took the assumption nothing needed to be done for a further 12 months.

With Covid restrictions taking their full force in March 2020, the IR35 reform was delayed for 12 months with a new implementation date of April 2021. Many contractors and end clients believed the HMRC’s 12 month ‘soft implementation’ would now allow them to avoid any changes until April 2022 – This is incorrect, and we are starting to see a significant increase in enquires who have only now been told by their agency/end client that they are required to change the way in which they’re working.

Blanket Bans on on limited company contracting.

It seems a host of end clients are not willing to take the risk with individual assessments as ultimately, if incorrect, they are now liable for any underpaid tax. This, in turn, has led to the growth on blanket bans of limited companies. Rather than investing time and resources to assess individual contracts IR35 status, the approach to ensure no potential future risk is to make a blanket decision to now allow contractors to use their ltd company and only allow them to invoice via an umbrella company.

Along with the blanket bans, recruitment agencies are typically issuing very limited options of umbrella companies they will ‘allow’ you to engage with, widely known as a PSL’s (Preferred Suppliers Lists). For further advice around agency preferred supplier issues, please let us know and we can provide additional guidance.

.If you find yourself being caught by a blanket ban on PSC’s, are looking for a Status Determination test, or simply you want a refresher on what the IR35 legislation means for you, please don’t hesitate to submit your details for a free, no obligation chat with one of our IR35 experts.

The deadline for the transition is 6th April 2021 however the legislation changes are aimed at your end client or the fee payer to determine your IR35 status. Unless your end client has told you already that you are outside of IR35, the probability is that you will be issued with a date and a new contract that firmly puts you inside of IR35, regardless of your working practices. If you want the freedom to choose your umbrella company, start looking now rather than being forced to use one from a pre arranged deal.

Many end clients have started the process of issuing new, inside IR35 contracts well in advance of the legislation deadline. If you have started to work under this new contract using your limited company, caution should be applied as it is you that is liable for any IR35 claim until the legislation changes in April, where the liability passes onto your end client.

IR35 in April 2022
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IR35 in April 2022What we know