Understand your position
We can't be much more direct than saying that you as a business needs to start preparing IR35 now. Yes, the law changes do not come into effect until April 2020. But there is a whole raft of operational things to be getting on with to get ready - and to be flexible, because it’s likely that some guidance from the government may come closer to the deadline than businesses would like.
The details of the changes are not finalised yet and the Government consultation has only just finished - if you want to read it, you can see it here. We won’t get the granular ‘black letter law’ as part of the Finance Bill until some time in the summer, but the experiences of the public sector and the responses to the consultation mean that what’s rolled out in the private sector won’t be an exact match for what the public sector have experienced. For example, there are likely to be new rules on information flow and mechanisms to encourage better conversations between clients and contractors if there is a disagreement about what the correct IR35 status should be.
The critical thing to begin now is an exercise to understand the current profile of any off-payroll workforce and therefore the scale of the change to be managed. We have seen that knee-jerk reactions and poor commercial decisions in the public sector were driven by fear and a lack of understanding of how exposed public sector users of freelance contractors were to the new rules.
Private sector users and intermediaries should begin conversations now, with each other and their suppliers, about how best to manage the new rules. In conclusion, clients need to have a plan and a timetable!
Assess your current freelance contractor workforce. Here you are looking to understand what contractors you are using TODAY:
Assess your current freelance contractor engagement process. Here you’re looking to understand, and be prepared for, the required administration of IR35. Some questions to answer:
As with any major piece of legislation (think: GDPR) there are a number of mistakes that can be made, here is a short list:
Misclassifying contractors outside of IR35 creates a risk that HMRC will launch an investigation. This can result in back taxes due, penalty fees and interest charges, alongside the time costs and legal fees for you.
Beyond this, if it is discovered that you are deeming contractors outside IR35 without reasonable care (for example, on purpose to avoid payments), then you could be accused of facilitating tax avoidance, which is punishable under the Criminal Finances Act!
Of course, all of the above can also come with significant reputational risk for your business. So it's in your interest to be prepared!
If you're an organisation that would like to know more about IR35 Safe by YunoJuno, we would love to give you a demo of the product. Simply enter your details below and one of our team will be in touch.