IR35 rollout: an historic moment?
The introduction of IR35 reform in the private sector has been described by IR35 specialist, Qdos, as an “historic moment” for the UK’s independent workforce but one that this “resilient” sector can overcome and will not lead to the end of contracting.
Following the rollout of IR35 reform on 6 April, medium and large businesses have now become responsible for determining the IR35 status of contractors they engage, with the fee-paying party now carrying the risk for incorrect assessments.
The changes resemble those enforced in the public sector in 2017, which saw all public sector organisations tasked with assessing IR35 status.
CEO Seb Maley said:
“The introduction of IR35 reform is an historic moment. It marks the culmination of years of the government chipping away at contractors, who have shown tremendous resilience and a determination to continue working this way. But while reform poses challenges to contractors and the businesses who rely on them, I am confident that contracting will survive.
“In recent months the tide has turned, with thousands of businesses now aware of the fact that IR35 reform is manageable. These firms, who have prioritised compliant IR35 status decisions and will continue engaging contractors, are set to gain a huge advantage over those who have banned contractors because of the changes - a short-sighted and totally needless decision.
“Despite IR35 reform and the problems the changes create, I am optimistic about the future of contracting. The economic climate, the changing makeup of the workforce and the growing demand for flexible, skilled and cost-efficient workers suggest contracting is here to stay in spite of these changes.”
However, implementing the changes is not going to be easy, it seems. Matt Fryer, head of legal services at tax consultant Brookson Group, said firms would need to take a “completely new approach” to workforce management following the changes.
He said:
“Processes need to be embedded throughout the company to ensure continuity, including undertaking a fair and accurate employment status test, managing the process of any challenges to status determinations, contract migration and recruitment.”
There has also been concern over the potential damage of the new rules on the self-employed. Ed Molyneux, the CEO and co-founder of FreeAgent, issued a warning on the harm that may be on the horizon:
"Today, the long-awaited changes to IR35 rules will finally come into effect. However, despite them being postponed for a year, I am concerned that the changes will still come too soon for many freelancers and contractors. This is the most significant tax change in the freelance and contracting economy for years - essentially pushing many people who are contracting within the public and private sectors into quasi-employment, albeit without any of the protections that they would receive if they were actual employees.
"But those who will be most impacted are the same freelancers and contractors who have been worst affected by the pandemic, and who are still dealing with the ongoing economic fallout from it. We know that many of these workers view IR35 in general as a fundamentally unfair piece of legislation."
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