With the impending Autumn Budget speech getting ever closer on 22 November 2017, talk of IR 35 reform being introduced into the private sector is widespread, but what can contractors do to safeguard their position?
The rules should not stop genuine contractors from operating outside of IR35, and since the rules were introduced in April this year, have worked with many public-sector bodies and agencies to ensure that contractors can continue to do so.
Mel Stride, the financial secretary to the Treasury, who was recently interviewed by the Financial times, said that it was now “an issue of fairness,” in determining whether IR35 reform in the public sector should be aligned with the private sector. It seems that the Government are geared up to make this change.
Unlike HMRC’s CEST tool which has recently been subject to much criticism, (because it disregards a key status test, despite being laid down in case law), we believe in reviewing each case on its own merits, considering all of the facts and specific circumstances and then making an informed decision based on those individual facts. Issuing blanket IR35 determinations as we’ve recently seen with the NHS, is unfair and has resulted in legal action being taken against them.
WHAT TO DO IF IR35 REFORM IN THE PRIVATE SECTOR IS ANNOUNCED
Start a dialogue with your end client and agency about IR35.
For any contractors operating in the private sector who are concerned about reform, talking to the end client directly about IR35 status is extremely worthwhile. This will help to ensure that there is a mutual understanding regarding tax status and working arrangements. In the event that there is a lack of understanding, by raising the issue with the end client now, it could provide that extra time to rectify matters and ensure that going forwards, a parity of understanding exists.
Consider your tax status
A detailed review o your IR35 status will highlight any specific areas which might need to be addressed. Having a review might give you the confidence to continue, with the knowledge that you are genuinely operating outside of IR35, fortified with the evidence to back this up.
Properly considering tax status now could be considerably helpful if you are required to explain why you consider yourself to fall outside of IR35, either to the end client, or in the event of an IR35 enquiry. If private sector reform goes ahead, the liability for IR35 falls to the agency or public sector body themselves, however for contracts undertaken before the date of implementation, the risk of enquiry remains.
Take the CEST tool
Although we would advise not to rely on HMRC’s CEST tool exclusively, undertaking a test alongside a review from an independent IR35 expert, could also be a valuable exercise. If reform is introduced into the private sector and all the signs are that it will, many end clients are likely to make use of the tool to assist in making the necessary determinations concerning tax status. So using the tool in advance could give you an indication of what your result will/should be.