Final advice issued about IR35 changing at Budget 2018

Extensive practical advice such as “liaise with PSC workforce to ensure no walkouts” is being issued to clients ahead of potential IR35 reform at Budget 2018.

Issued by Qdos, the advice goes as far as guiding end-users through the IR35 status decision-making process to avoid a blanket approach -- ‘review each engagement on its own merits.’

Further tips the status advisory is giving to engagers to get their own houses in order include – ‘train relevant internal staff on IR35’ and ‘relay your IR35 decision to the agency.’

'Tools'

Agencies themselves are given guidance too, critically; ‘consider existing processes/systems to ensure you are equipped with the appropriate tools’ to make inside/outside IR35 payments.

Qdos also advises them to ‘create a clear form of communication with engagers,’ ‘review admin processes for payroll,’ and ‘keep a record for HMRC of payments to contractors.’

Some of the advice for agencies overlaps with the advice given to end-users, due to the envisioned framework having overlaps too. The IR35 and status advisory says:

“It is widely expected that the rules implemented within the public sector will be extended to the private sector, meaning that private sector businesses will be responsible for determining the employment status of any PSC workers they engage.  

“Those workers who fall inside of IR35 will be required to have PAYE and NICs deducted at source from their income – the responsibility of this will fall to the fee- payer which will either be the end client business or the recruitment agency.”

'Dialogue'

Those workers, and their counterparts ruled outside IR35, should be recipients of “consistent and relevant dialogue” about any internal changes made by the engager to reflect the rules.

Keeping workers ‘in the loop,’ the advice therefore suggests, is the “key” to ensuring that those who are PSCs do not walkout and abandon their work before decisions get made.  

“Each [contractor] engagement should be reviewed on its own merit and making ‘blanket’ decisions should be avoided,” Qdos says.

“Whilst there may be similarities in delivery of services within certain groups of workers, there should still be a considered assessment undertaken.”

'Lack of control'

Contractors, as well, are offered tips from the advisory, mainly because “in some instances,” the agency or end-user will “only accept” non-PSC solutions, such as umbrella companies.

“This lack of control puts contractors in a difficult position”, said Qdos.

“Most recruitment agencies will have a PSL, often containing from three to five umbrella companies, and will only accept contractors working through those specific firms. This is done for compliance and/or commercial reasons, but leaves contractors with little choice over who they can use.

“[But contractors -- ] take the opportunity to voice your opinions… encourage your end-client/agency to speak with [an independent IR35 advisory, and finally] check your status.”

Elaborating on the latter, the status firm said that while it does not recommend CEST in general, the tool is “likely to be the first port of call for many end clients.”

It added: “Using the tool will give you a heads-up of what your result will or expect to be. You may also want to have an independent IR35 contract review completed for the same reasons.”

'Act now'

Last night, Qdos chief executive Seb Maley reflected on the all advice it has issued (available in a series of slides), but he had a particular message for end-clients.

"Should further IR35 reform be announced in the Budget next week, it’s vital private sector engagers start preparations immediately, irrespective of whether changes are due to arrive in 2019 or 2020."

He also told ContractorUK: “If engagers educate themselves with the knowledge and equip themselves with the skills to make well-informed status decisions, IR35 reform -- while unnecessary and short-sighted -- can in fact be managed.”