We cannot stress enough how important it is that all parties in the supply chain communicate with each other from an early stage. We would advise you and your fellow contractors to approach your end client, and agency where involved, to discuss the imminent changes if they have not already approached you. Engagers need to understand that by collaborating with contactors, they stand a much better chance of determining IR35 statuses accurately and retaining talent.
We are seeing well prepared and forward-thinking end clients beginning to engage with their temporary workers in order to establish a way through. Most are taking a similar approach in order to prepare and we encourage you to participate as fully as you can where you are asked to do so.
Embrace Contractor Audits
End clients who are showing a willingness to adapt and understand the changes are undertaking contractor audits. Four key questions are being asked: -
1. Who are their contractors?
2. Are they engaged directly or via an agency?
3. Are they engaged via an Umbrella company or a PSC?
4. What skills do they bring to the business?
Having identified the contractor population, the next step is for case by case indicative IR35 status assessments to be carried out. The results of these assessments will help quantify the potential financial and logistical consequences of the proposals and will form the basis of future policies where end clients engage with contractors. It is important that you understand your end client’s approach and how this may affect you.
If you are invited to a face to face meeting with your end client or asked to take part in an indicative assessment of your IR35 status you should do so and you should answer any questions asked as accurately as possible.
Commission IR35 Contract Review
An independent and unbiased expert review of your contract and working practices may prove to be a vital piece of evidence in your armoury to protect your status. If you are fearful that your end client may make an inaccurate or risk adverse decision with regard to IR35, you will be in a strong position to challenge and potentially overturn the decision if you have already commissioned your own review.
Whilst HMRC continue to promote the use of CEST (an online employment status tool), there remains much concern over the validity of its results and the accuracy of it when compared to known case law in the area. Engaging a specialist review of your status will be much more reliable and insightful than relying on a simple algorithm that cannot possibly understand the idiosyncrasies of personal interaction.
Request a Confirmation of Arrangements Statement
Why not ask your end client to confirm your joint understanding of the nature of your interaction? A confirmation of arrangement statement reflects the true nature of the working relationship between the two parties and is a method by which you can both formally document and agree your working practices.
The statement should outline the specific reasons you both feel that your contract is outside of IR35 and can be used later to supporter your end client’s determination under the new rules, to challenge a decision you disagree with or to defend you in an IR35 investigation with HMRC.
It has always been important that you have a strong case for demonstrating that you work outside of IR35 and this is even more important now that you won’t be responsible for determining you own status. We would recommend that you gather “evidence” in the run-up to April 2021, which supports your status as a genuine business.
Our Guide to Demonstrating you are Outside IR35 highlights what this evidence may look like. As well as collecting information to prove that you have a right to substitute, that you do not work under direct control and that you are not obliged to carry out the work it is worth also retaining information that shows you are not slipping into being “part and parcel” of your end clients organisation. This “evidence file” or “compliance file” should include information that shows you take financial risks, that you incur your own costs of training and insurance to name just a few.
IR35 reform is manageable
Despite the obvious concerns and uncertainties right now, these proposed changes can be managed. With a collaborative and proactive approach from all parties there are ways to adapt and protect your IR35 status. The more flexible and adaptable the supply chain is the more the parties can explore their options and help achieve the best possible result for all involved.
We work with thousands of Contractors and can support you in understanding your IR35 status If you think you would benefit from some further assistance please call on of our Accountants on 01296 468185. Alongside Orange Genie Accountancy we have Orange Genie Compliance, our expert IR35 consultancy service. We are currently working with some large national end clients and recruitment agencies in order to assist them assess their contractor base. If you feel your end client would benefit from some expert help and advice feel free to contact us and we can see how we can help.