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Private-Sector IR35 Reform: Why it doesn’t have to force you inside IR35

Contractor's Guide to Demonstrating You're Outside IR35

IR35 itself is not changing

IR35 is over 20 years old, and the rules that govern whether you’re affected by it are not changing at all. If you’re genuinely working outside IR35 at the moment, there’s every chance that you will continue to do so after April 2021.

The detail that’s changing is that your client will be responsible for determining your status. For those contractors who are currently working outside IR35, the battle is to persuade your clients to assess your status correctly.

Working as if you’re outside IR35 when you should be inside is already a risk, so if you’re not sure of your status we strongly recommend assessment by an independent expert. This will also provide you with strong evidence in support of your status if you’re outside IR35.

The reform should not prevent clients engaging contractors outside IR35

As HMRC are fond of telling us, there is no reason why clients can’t engage contractors outside IR35, as long as this is genuinely the case. The problem is that establishing this requires effort and expense on the part of the client, and in the run-up to April 2020 some end clients proved unwilling to make that investment.

It is to be hoped that with additional time to prepare, most clients will see the benefits of engaging contractors outside IR35, and will be prepared to make the necessary preparations so they can do so safely.

Advantages for your end client

Clients who are able to engage contractors outside IR35 have two main advantages over those who don’t.

  • Where contractors are engaged through PSCs and outside IR35, the client doesn’t have to cover employer’s NI, so hiring contractors costs them less.
     

  • Contractors are likely to prefer clients who manage IR35 status properly, which will make it easier to attract and retain the best talent.

This combination means that those end clients who assess IR35 correctly and are willing to adapt their working practices to make it more likely that contractors will fall outside IR35, will have an easier time sourcing the skills they need, and getting their projects finished within the necessary budget and timescales.

Action contractors can take now

Establish your current IR35 status and gather evidence to support it

This will usually mean getting a contract review from an independent IR35 expert, and gathering evidence of your working practices as an ongoing part of your work as a contractor. For more information on how to establish and evidence your status, download our Guide to Demonstrating You’re Outside IR35.

Speak to your clients about IR35 reform

Hiring contractors is likely to be a small part of your client’s business, so IR35 may not be on their radar at the moment. They only have a few months to prepare, though, so it’s important that you speak to them about their plans, and encourage them to seek expert help if they need it.

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