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IT contractor jobs agencies plough on with ‘ambiguous, burdensome’ IR35 reform

IT contractors’ recruiters are putting a brave face on Spring Budget 2023 making no tweaks to IR35, leaving them and their clients to struggle on with administering the off-payroll rules.

Agencies appear to be adhering to the letter of the law, even if ‘blanketing’ — all PSCs inside IR35, and ‘banning’ — no PSCs whatsoever, is continuing, typically at large organisations.

‘Flirting’

Even the government “flirting” a few chancellor statements ago with repealing the 2017 and 2021 rules hasn’t affected the status quo, First Point Group’s Phil Jones told ContractorUK.

“Each contractor role is individually assessed within the guidelines and determined as inside or outside IR35,” said a by-the-book Jones, from FPG’s London office.

Viki Dowthwaite, of Trinnovo Group confirms that “the continuation of these rules” by the chancellor sees clients “continue to assess each contractor’s individual working practices.”

‘Ambiguous, burdensome IR35 rules’

She made no mention of the agency’s high-growth technology sector clients engaging in blanketing or banning, but there was a hint of sympathy should they feel they have no choice.

“These rules present a long-term, ambiguous job and a heck of an administrative burden [for clients who must assess] the different IR35 markets, and the legal wording [of contracts]”.

Like clients, agencies have been given a tool by HMRC to test IR35 status but it’s “not fit for purpose,” continued Dowthwaite, contract lead for Trinnovo’s Trust in SODA and Broadgate.

‘Agencies led by their large clients’

“CEST is popping out 20% of [the time with] ‘undetermined’ and businesses have no further support or guidance provided by HMRC to enable them to make the final determination.

“And often,” she continued to ContractorUK, “particularly in the case of large organisations, agencies must be led by the end-client’s approach to IR35.

“We can advise on why they should take a practical approach, engaging outside IR35 contractors where appropriate, but ultimately, it’s up to the end-client and HMRC to adopt a more user-friendly approach.”

The angst behind her comments will be recognised by the 52% of agencies somewhat or very “concerned” by compliance with IR35 reform, Cool Company has found.

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‘Four in ten encounter difficulties when recruiting due to IR35’

A further 43% of agencies say that IR35 compliance has caused them “difficulties when recruiting for contract [opportunities],” adds a Cool survey of January 2023.

Fresher findings on IR35’s impact will be released shortly by the Association of Independent Professionals and the Self-Employed (IPSE).

A poll from IPSE asking for contractors’ input on IR35 is still open and accepting both tick-box answers and comments on the framework.

‘Some end-users moving away from blanketing, but not all’

The association’s Andy Chamberlain is hoping to see an improvement on the one in five contractors who were subject to a blanket inside IR35 determination (as of October 2021).

“We’re hearing some clients are moving away from blanketing, while others, particularly in financial services, continue to insist on the umbrella route,” Mr Chamberlain told ContractorUK.

Ahead of the IR35 poll closing soon, the IPSE policy director added last night: “It feels like the picture overall is getting better. But that’s not the experience of every contractor out there.”

‘Blanketing is beyond me’

Indeed, one limited company contractor confesses to no longer being ‘out there’ out all, directly due to ‘blanketing’ and despite beating IR35 in a high-profile case against HMRC.

“I stopped contracting because one of the [well-known] companies blanket-banned PSCs,” posted Elaine Richardson, whose ECR Consulting defeated the Revenue in 2011.

“[Blanketing] is entirely beyond me…[but I hope with skills shortages or similar it] comes back to bite those clients who just blanket ‘assess’ as inside for their own convenience.”

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‘HMRC to look for opportunities to improve off-payoll rules’

Responding to a ‘Reverse IR35’ petition this month, HM Treasury said the government has “continued work to understand…how improvements could be made to the way the rules work in practice.”

Adds the response of March 9th 2023: “The government very much values the contributions of flexible workers, including the self-employed, to the UK economy and is committed to the tax system becoming simpler and more dynamic to help reduce burdens on businesses and individuals.

“HMRC will continue to provide support and guidance to individuals and businesses operating the rules and will continue to look for opportunities to improve the way these rules work in practice.”

‘Sense’

At Trinnovo, Dowthwaite believes the improvement is to revert to what the rules stated for 20 years; where they previously placed responsibility, and where the rules today place the decision-making responsibility for PSCs whose clients are small companies.

She told ContractorUK: “Surely it would make more sense, if the person conducting those working practices and contracted by any agreement advises on their own status.”

By Simon Moore

Source: Contractor UK

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Conservative MP calls for Sunak to reverse IR35 reforms

Conservative backbencher Sir John Redwood has called for Prime Minister Rishi Sunak to reverse the “very bad deal” IR35 is bringing to self-employed workers.

Appearing on Sky News over the weekend, Redwood said: “I think, first of all, the self-employed are getting a very bad deal.

“I think we should reverse the 2017 and 2021 changes to so-called IR35. We want to promote more self-employment – make it easier for people to get into self-employment.

“That is the quickest way to expand capacity.

“Then I think we need to look at business taxes. I don’t think the Corporation Tax delayed increase will raise the money The Treasury and the OBR think it will.

“All the evidence is, in the past, when Conservative governments have had the courage to cut the Corporation Tax rate – never a popular move – it raises more money.”

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The highly controversial changes to off-payroll working tax rules came into force in 2012, with a year’s delay due to Covid-19.

The legislation mans medium to large-scale businesses are responsible for determining the IR35 status of contractors they hire.

The reform was set to be repealed as part of the mini-Budget in September 2022, before the plans were abandoned by new Chancellor Jeremy Hunt.

IR35 insurer Qdos has welcomed calls from Sir John to reverse the off-payroll working rules,

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The he firm’s chief executive, Seb Maley, said: “Millions will welcome Sir John Redwood’s comments. Whichever way you look at it, IR35 reform has damaged flexible working in the UK,” Mr Maley said, “It’s made it harder to work self-employed and harder for businesses to engage these workers – at a time when the economy desperately needs the skills and flexibility of independent workers.

“Rishi Sunak himself saw through IR35 reform in the private sector when Chancellor. So he’s no stranger to this legislation, nor the challenges it has created. Reversing IR35 reform would be the fair and logical thing to do.

“However, when it comes to IR35, the government has anything but fair and logical. Its head has been buried in the sand for years.”

By Ryan Duff

Source: Energy Voice

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Five reasons why HMRC’s IR35 report has been criticised

An HMRC report on how IR35 reforms have impacted contractors has attracted criticism.

Read on to find out what the report said about IR35 and why it’s been accused of being ‘wide of the mark’.

HMRC report – what were the key findings?

Published in December, the HMRC report was based on a telephone survey of 353 businesses with 39 follow-up interviews.

Here are some of the key findings:

  • 130,000 workers are likely to have been affected by off-payroll reforms in April 2021
  • IR35 reform generated an additional £1.8 billion in tax revenue between October 2019 and March 2022
  • businesses employing contractors incurred an overall one-off cost of between £90 million and £230 million to implement the reforms
  • they spent a further £150 million to £370 million between April 2021 and April 2022
  • the number of workers affected by IR35 reform makes up 2.5 per cent of the total self-employed workforce

What happened to contractors affected by IR35 reform?

According to HMRC estimates, the majority of contractors impacted by off-payroll working reform have become an employee of a business that isn’t their own freelance company.

It suggests that approximately three per cent have continued to work for their own freelance company having been deemed ‘employed for tax purposes’ by the business they work for.

Of those who have become an employee of another organisation:

  • 65 per cent have moved to organisations which aren’t agencies or umbrella companies (which could include becoming an employee of a client)
  • 20 per cent have moved to an umbrella company
  • 15 per cent have moved to an agency

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Do businesses still work with contractors post-IR35 reform?

HMRC’s research suggests that 41 per cent of organisations surveyed now work with fewer off-payroll contractors than they did in March 2020.

Meanwhile, 35 per cent said they hired the same number of off-payroll workers and 23 per cent said they’ve taken on more since IR35 reform.

The survey also found that 47 per cent of businesses worked with the same number of off-payroll contractors in September 2021 than in March 2020.

Five reasons why the HMRC report has been criticised

A number of off-payroll working experts and commentators have criticised the government’s report, according to publications like Contractor UK and The Register.

One commentator said the report was ‘wide of the mark’, while another said the findings should be taken with ‘a pinch of salt’.

Here are five reasons why it’s attracted a negative response:

1 . Could contractors be paying unnecessary taxes?

Many of the 130,000 workers who have moved to payroll since the reforms may have incorrectly been categorised as inside IR35, meaning they are now paying tax they shouldn’t be.

Matt Fryer, Managing Director of Brookson, said that the HMRC research should have included findings on incorrect determinations or status determination statements.

“HMRC seems keen to highlight that this represents just 2.5 per cent of the total self-employed workforce, and less than one per cent of the total workforce. Is this an indication that the government is content with the unfairness of this outcome?,” he said.

2 . Timing of research doesn’t paint ‘accurate picture’

By focusing on the period between March 2020 and September 2021, the research failed to give an accurate indication of the before and after scenario, according to Dave Chaplin, CEO of IR35 Shield.

This is because most businesses had already changed their working practices as the delay to off-payroll working reforms was announced just three weeks ahead of the original deadline in April 2020.

“Choosing March 2020 as the baseline is somewhat of a statistical howler and means the report paints a less disruptive picture than what occurred in reality,” Chaplin said.

3 . Underestimating the upheaval of IR35 reform

The HMRC report fails to tell the story of the impact of changing off-payroll rules in 2021, according to Seb Maley, Chief Executive of Qdos:

“Read this report and you’d think that the off-payroll rules have been plain sailing.

“We’re…told that half of businesses have found it ‘easy’ to comply with the off-payroll rules, and that around eight in ten firms assess IR35 status on a case-by-case basis.

“These statistics paint a nice picture, but I would take them with a pinch of salt. True, more businesses are getting to grips with these rules, but it’s been a difficult journey.”

4 . HMRC should have spoken to contractors and accountants

A former HMRC employee and now Co-Founder of Bauer & Cottrell, Kate Cottrell said the findings were “questionable” due to a lack of perspectives.

She commented: “To make this research have any value, you cannot limit it to asking just one party that has been affected by IR35 reform, even if you are only seeking short-term effects.

“For starters ask contractors how easy it was for them; ask all the accountants how many contractors they have lost and ask all the umbrellas how much new business they have gained.

“Ask the agencies how their client and contractor bases have changed; ask all the trade bodies, insurance providers and accountancy institutes how IR35 reform has been for them.”

5 . A pool of survey respondents that was too small

Cottrell went on to criticise the number of respondents to HMRC’s survey.

She said there should have been evidence from “tens of thousands of real-life experiences” instead of 353 calls and 39 follow-up interviews.

“It really is time for some balance, to seriously establish the short-term effects and of course the longer-term ones right up to the present day,” Cottrell commented.

“A key question is how much HMRC has spent on it all. Noticeably absent from this report, I suspect it will be an astonishing amount,” she added.

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HMRC responds to IR35 criticism

Responding to the negative comments about its study, an HMRC spokesperson said: “This reform has succeeded in improving compliance with the off-payroll rules, with more people who work like employees paying tax like employees, levelling the playing field.

“It is nonsense to assert that most businesses had changed their workforces by March 2020. Our analysis shows only 20,000 of the 130,000 workers identified who changed the way they work due to the 2021 reform had done so by March 2020.”

By Conor Shilling

Source: Simply Business

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The hard truth about IR35 reform’s repeal and advice for contractors

The dust hasn’t even yet settled on chancellor Kwasi Kwarteng’s announcement that IR35 reform of 2017 and 2021 is to be repealed, but the scaremongering has already begun.

There’s also the speculators, the cynics, and the so-called ‘experts’ – those with vested interests, and those bitter from being left out of the conversation. And they are on top of the odd article unhelpfully and boldly claiming to contain no less than “everything” IT contractors need to know about the reform’s repeal. If only it was that simple, writes former HM Treasury secondee and ex-tax inspector Kate Cottrell, the co-founder of IR35 specialists Bauer & Cottrell.

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As of October 2022; what are we seeing?

The initial euphoria, expressed by many following the chancellor’s announcement that the Off-Payroll Working (OPW) rules are to be repealed from April 6th 2023 has died down.  There are three main reasons for this:

  1. Is it really going to happen? Nothing has changed yet and we have a Budget coming up in November, preceded by a government already doing a U-turn on its 45p tax rate plan. The possibility of further U-turns therefore seems significant. Fingers crossed that this promised repeal of the OPW rules goes ahead. But it’s not certain.
  2. End-clients (both public and private sectors), agencies, umbrella companies, accountants and IR35/OPW advisers are all taking stock and wondering how this could affect their business. And yes, that goes for me too!
  3. Contractors are realising that unless they have always been outside IR35 and working for ‘small’ companies (not affected by the OPW rules), that their own circumstances are complicated.  Notably where the contractor is:
  • currently with an umbrella, or
  • holding an SDS where the client has stated ‘inside IR35’, or;
  • regularly jumping between their PSC and an umbrella company depending on the IR35/OPW assessment.

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Beware scaremongering

At this stage (Q4 2022), nobody knows how the repeal of the OPW rules will work. That’s the unpopular, hard truth. So — many commentators are reaching for their crystal balls, with some suggesting that there will be new rules for contractors added onto the IR35 rules of old (2000), such as requiring contractors to complete Status Determination Statements. There’s even the odd whisper that end-clients will continue to determine IR35 status; that blanket bans on using PSCs will continue indefinitely, and that HMRC will declare some sort of ‘amnesty’ on prior SDSs with ‘inside’ results. As interesting as they are, these really are only opinions at this stage and should be taken as nothing more.

It is impossible to make concrete plans, yet

Until we see the detail of the IR35 reform repeal in black and white via the Finance Act, it is only possible to try to plan, and consider risks based upon scenarios that may be realistic. That’s where we can have some sympathy for the genuine, qualified, advisers in this space trying to look into the future.

Fortunately, HMRC has promised further guidance for contractors unfamiliar with the IR35 regime. But it is likely (in my view!) that this guidance will be in the form of a referral to the guidance already in place. My expectation is for a straightforward repeal of the OPW rules, with no add-ons, changes, and nothing new that has not already been in place since April 2000.

What can you do in the next six months?

Every part of the contracting chain needs to use this time to analyse the effects on their own businesses and it is vital that all get up to speed with IR35 version one (2000). 

We have seen many “IR35 experts” born since the advent of the OPW rules, and I’d caution contractors to be very careful as a result. These so-called ‘experts’ are, perversely, actually very well-positioned if it pans out that the only thing that changes post-April 6th 2023 is who makes the IR35 decision, and who is liable for getting that decision wrong. For our part, our advisory will continue to work with the same case law precedent, and keep a keen eye on the cases going through the tribunals and courts.

What is the best advice for contractors over the next six months?

  • Keep watching the contractor press for developments (the contractor ‘press’ that doesn’t just stick a press release up!).
  • Decide what you want to do — if you could.
  • Collect and keep all evidence including SDS outcomes, online IR35 status tool outputs, end-client correspondence, contract review results, and working practices changes/opinions.
  • Find out about your personal situation now, to see what the options and (above all else) the risks are, and if a change in your status is feasible.
  • Speak to your client and find out what their position may be come April 6th 2023, especially if you are contracting with an organisation that has banned PSCs.
  • Take advice from only those that, as impartially as possible, understand all the rules (from 2000 onwards), and ideally those with hands-on experience of successfully defending IR35 HMRC investigations.

Final thought

In short, make good use of the next six months so you are ready for April 6th 2023!

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Mini-Budget: IR35 will be repealed from April

The IR35 reform will be repealed from April 6, 2023, according to this morning’s mini-Budget.

Speaking to the House of Commons today (September 23), Chancellor Kwasi Kwarteng said from April, workers across the UK providing their services via an intermediary, such as a personal service company, will once again be responsible for determining their employment status and paying the appropriate amount of tax and NICs.

Kwarteng also used today’s mini-Budget to scrap the additional rate of income tax and cut its basic rate to 19 per cent in a series of tax cuts which amount to £45bn.

The 2017 and 2021 reforms to the off payroll working rules – also known as IR35 – were a tax law that required the end client, and not the contractors they hire, to decide if the working relationship resembles a self-employed engagement or employment.

Under existing rules, the fee-paying party (either the end client or recruitment agency) shoulderd the liability.

The aim of the reform was to stop the promotion and misselling of disguised remuneration schemes, however the legislation has received criticism.

Kwarteng has repealed these reforms as part of the first steps in taking complexity out of the tax system.

He said: “To achieve a simpler system, I will start by removing unnecessary costs for business. We can also simplify the IR35 rules and we will. In practice, reforms to off-payroll working have added unnecessary complexity and cost for many businesses.

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“So as promised, by the prime minister, we will repeal the 2017 and 2021 reforms. Of course, we will continue to keep compliance closely under review.”

The changes will mean workers will once again be responsible for determining their employment status and paying the appropriate amount of tax and national insurance contributions.

This will free up time and money for businesses that engage contractors which the chancellor said could be put towards other priorities.

The reform also minimises the risk that genuinely self-employed workers are impacted by the underlying off-payroll rules.

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IR35 reforms
In August, prime minister Liz Truss gave an interview where she indicated she would review the IR35 reforms.

The reforms were introduced in April 2021 to the private sector, and means that the responsibility for assessing whether a contractor is self-employed or employed is now with the end client, and not the contractor themselves.

The liability, and therefore financial risk, was also transferred to the fee-paying party.

The changes have been branded “a mess”, “unpopular” and “puzzling”.

The controversy surrounding the changes prompted the former chancellor, Sajid Javid, to pledge a review of IR35 as part of the Conservative party’s manifesto in the lead up to the general election.

By Sonia Rach

Source: FT Adviser

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What HS2’s £9.5millon IR35 tax provision means for contractors

Yet another public sector body looks to have fallen foul of IR35.

This time, it’s High Speed 2 (HS2) – a government-funded arm of the Department for Transport – that is readying itself for a £9.5million tax bill.

If confirmed, this latest IR35 calamity in the public sector would take the cost of non-compliance in government departments well past £270m, writes Seb Maley, CEO of Qdos.

As revealed in HS2’s annual accounts, the £9.5m has been set aside in the event that HMRC confirms that mistakes have been made following the introduction of IR35 reform in the public sector in 2017.

A public sector IR35 problem of a different kind
But HS2’s IR35 problems look to be slightly different from those experienced by the likes of the Ministry of Justice, Defra and the Home Office, to name but a few. Instead of incorrectly assessing the IR35 status of contractors engaged – which has been an issue for the aforementioned departments – confusion looks to have arisen with regard to a consultancy providing contractors to HS2.

“During 2020, internal checks and additional HMRC’s guidance highlighted some cases of workers who were engaged through other suppliers that had not been appropriately reviewed”, the accounts state.

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Them, not us
Put differently, HS2 didn’t carry out IR35 assessments or issue Status Determination Statements (SDS) to contractors engaged via a third-party, given it took the view that this third-party was responsible for determining status.

If the third-party supplied a genuinely outsourced provision of labour, this would be true and HS2 wouldn’t be required to carry out IR35 determinations. But if the third-party is merely providing contractors, the buck stops with the end-client – in this case, HS2.

This is why HS2 has allotted £9.5m, ready to settle up with HMRC, should the tax office find that not only has the high-speed railway organisation misunderstood its responsibilities under IR35, but potentially also engaged contractors under the wrong IR35 status.

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Wider implications of HS2’s potential IR35 slip-up
Eye-watering tax bills aside, the worry is that it could see another public sector body take a needlessly risk-averse approach to IR35. That’s been a ‘strategy’ adopted by far too many organisations due to a lack of understanding with regards to how the revised off-payroll rules can be implemented compliantly because contractors can, in fact, be engaged outside IR35.

It’s my view that banning contractors would jeopardise the entire HS2 project. Giving contractors ultimatums – ‘work inside IR35 or via umbrella companies’ – will result in significant skills gaps, as contractors opt to work elsewhere with businesses offering genuine contractors the opportunity to operate outside IR35. In a space which relies heavily on specialist skills and the need to engage these skills in a cost-effective manner, transferring all contractors onto the payroll increases costs dramatically.

HS2 is risk-averse on IR35 anyway
With that being said, it’s not as if HS2 has a habit of engaging contractors outside IR35. Its accounts show that just 20 of the 294 contractors engaged between April 2021 and March 2022 operated outside IR35. That’s a figure which is at odds with the 86% of more than 32,000 contractors that our IR35 contract review business has assessed on behalf of businesses which, after a rigorous assessment, in our view belong outside IR35.

Focusing on how the contractors were supplied to HS2, which as I mentioned was via a third-party consultancy, above all else, it highlights just how important it is that both the end-client and the consultancy understand which party is responsible for determining IR35 status, along with their wider obligations under the reform.

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The ‘contracted out’ conundrum? It spells o-p-p-o-r-t-u-n-i-t-y to HMRC
So will we see more of this – not just in the public sector – but in the private sector too?

Don’t rule it out. Engaging contractors via a third-party means there is a slightly different consideration for end-clients which, as I previously outlined, is whether or not the provision of labour is genuinely outsourced or not. HMRC will be well aware of this — of course, and could well scrutinise these arrangements on a wider scale.

Added to this is the economic landscape and the pressure that HMRC is under to raise tax revenue for the Treasury. Going forward, I expect the tax office to ramp up IR35 compliance activity among businesses generally speaking, but also focus on these specific areas where confusion can easily arise, which presents an opportunity for HMRC.

By Seb Maley

Source: Contractor UK

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Ensure your contract keeps you out of IR35

What can contractors and freelancers learn from HRMC’s win against Sky Sports presenter Alan Parry? Here are tips to make sure you stay out of IR35.

Earlier this month Sky Sports pundit Alan Parry lost his IR35 appeal against HM Revenue & Customs over a £356,000 tax bill. The football commentator, 74, contested an HMRC claim that the contract held between his own company, Alan Parry Productions Ltd, and BskyB over the five years to April 2019, amounted to an employee relationship, rather than self-employment.

Under IR35 rules, a set of tax laws which govern off-payroll freelancers, if a contractor is deemed to be a “disguised employee” for tax purposes, and not genuinely self-employed, they must pay PAYE and national insurance contributions.

HMRC’s IR35 win came down to how tightly worded Parry’s contract was, giving BskyB more control than it needed, according to Parry’s lawyer Chris Leslie.

Commenting on the case, Dave Chaplin, chief executive of tax compliance firm IR35 Shield, told the Financial Times that contractors and employers should be aware that “the contract is king”.

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What the Alan Parry case means for freelancers
HMRC’s win against Alan Parry will no doubt be uncomfortable reading for freelancers. Once again it brings into sharp focus, HMRC’s intent on tax equality and its use of the off-payroll rules. While a fair tax system is a good thing, the legalities are difficult to navigate.

If there is one thing to learn, it’s that you must also take responsibility for managing a status determination of inside or outside IR35 yourself and avoid any reason for doubt in the contract. Quoting Chris Leslie, the lawyer who represented Parry, Parry’s contract contained ambiguity which gave Sky “more control than was needed or wanted”.

This word “control” should be the biggest learning from this. You must ensure you are the controlling party, not the hirer, so take responsibility for generating a contract to reflect it. As the Parry case shows, standard company contracts won’t work when it comes to IR35.

Instead, they must reflect the work you will undertake, how you will do it – e.g. with your own equipment in your own working hours, and that you have the right to substitute yourself for another professional.

Substitution clauses are a helpful way to show you are operating as a business and not as a quasi-employee, as Lorraine Kelly successfully argued when she proved she was instrumental in determining who covered for her when she was on holiday.

Here are some other things you can do to ensure you stay the right side of the law:

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Recognise that off-payroll represents a risk to a client
They want and need to get it right, because they don’t want a tax bill for getting it wrong. It’s true that when off-payroll first came into the private sector, there were some companies that were so concerned about getting determinations wrong that they banned contractors altogether. The world has moved on, as the impact of not having access to flexible contingent skill hit home.

Despite seeing some blanket use of inside IR35 contracts to manage the risk, it’s starting to become the anomaly.

Overall, the decision to engage contractors and freelancers has been good news not just because it opens options for work, but because it’s highly likely that a company will be ready to discuss the arrangement and create a contract which clearly falls outside IR35. But you need to be informed to do this and understand the nuances of the legislation.

There are three specifics to prioritise:

Mutuality of obligation
People who get a contract right are using statement of works to set out exactly what they will do by when. This also meets another HMRC test called “mutuality of obligation” (MoO) whereby you show that you are not like an employee and paid simply for being at your client’s disposal, instead you are paid to deliver a specific piece of work.

Overall, being savvy about how MoO helps determine a status will help you get into a position where you can confidently negotiate – there’s evidence that the more informed you are, the more likely you will secure an outside status determination which will hold with HMRC.

Many self-employed professionals find it helpful to undertake their own assessment of all the rules first, so they can adjust their approach to working with a client and create a watertight seal.

Understand being in business on your own account
In the high-profile Kaye Adams case, Kaye demonstrated that she was in business on her own account, and this was pivotal to being deemed outside IR35. Things that will help you show this are to have multiple concurrent clients, a dedicated office, and even employees.

Show you are not part and parcel of the organisation
Working practices are critical to compliance. If you behave like an employee, then you will be treated like one, giving HMRC more justification.

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Quick wins to stay out of IR35

Quick wins to avoid scrutiny are:

  • Develop a brand, and have a dedicated website and social media presence
  • Trademark your company name
  • Invest in your own phone, computing equipment, printer etc
  • Invest in yourself through training and memberships to professional bodies
  • Ensure you have things like professional indemnity and liability insurance.

Things to avoid to stay out of IR35

For all the do’s there are also a lot of do nots. Here are just a few of the things that can get you into hot water:

  • Going to company training and social events
  • Getting involved in appraisals or any HR matters
  • Accepting performance bonuses open to employees, or take advantage of things like gym memberships
  • Being misrepresented as an employee – make sure it’s clear you are a contractor or associate on your ID badge, email address and org charts
  • Taking on new work before you have adjusted the terms of the existing contract
  • Taking days off with permission – you should inform your client you’re not available
  • Working the same working pattern as staff

These things combined with knowledge and understanding, and following good practices and behaviours, will stand you in good stead when it comes to running an IR35 status assessment with a client. The way you conduct business and engage with them should be clear and correlate to an outside determination.

James Poyser is CEO of inniAccounts and founder of OffPayroll.org.uk

By James Poyser

Source: Small Business

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Contractors at risk of being taken in by bogus badges from ‘sham’ accreditation outfits

Contractors must start double-checking the badges that umbrella companies display on their website, experts are appealing to readers of ContractorUK.

The advice to check that the provider’s badge is a stamp of approval from a genuine, verifiable accreditation body featured in a new umbrella company checklist for contractors.

But an avoidance scheme blacklisted by HMRC – Peak PAYE Ltd — has since been observed using a badge emblazoned with ‘The Institute of Freelancing & Contracting Professionals.’

The institute describes itself as: “The UK’s most prominent professional membership association; promoting compliance, maintaining standards, and certifying the UK’s leading umbrella companies, contractor accountants, and payroll providers for freelancing contractor professionals.”

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‘Accreditation from unverified parties’
But established in 1999 and visible lobbyist against IR35 ever since, the Association of Independent Professionals and the Self-Employed has never heard of the institute.

“IPSE has not been previously aware of ‘IFCP’ and is not therefore in position to verify its legitimacy, or otherwise,” says a cautious Andy Chamberlain, IPSE’s policy director.

He further told ContractorUK: “We…advise contractors to take great care when choosing a provider. We would also add that contractors should be wary of any claims of accreditation from unverified parties.”

‘Unconvincing attempt to provide a veil of legitimacy’
Attempts to verify the institute’s legitimacy are complicated by the institute itself however, as it also calls itself, ‘The Society for Professional Freelance Contractors and their Associates.’

Its website has a third name, ‘Independent of Freelancing and Contracting Professionals,’ and a fourth (minus the “of ” blooper), ‘Independent Freelancing and Contracting Professionals.’

A long-standing adviser to the self-employed has heard enough.

“This is fairly obviously a very unconvincing attempt to provide a veil of legitimacy to at least one non-compliant operator,” said the adviser.

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‘Sham organisation’
Declining to be named the adviser added: “I [have been advising the self-employed for 12 years] and don’t know of anyone who works [at the IFCP].

“And as far as I can [see]…no evidence of them [exists] on Companies House, and even their ‘links’ to their Twitter and LinkedIn profiles don’t actually take you anywhere. It’s a sham organisation – so contractors beware.”

Also having tried to run some checks on the IFCP is WTT Consulting – an HMRC dispute advisory recommended in last week’s umbrella company checklist as a bonafide assessor.

‘Paper-thin entity’
The advisory’s tax director Graham Webber described the ‘organisation’ to ContractorUK last night as a “paper-thin entity” appearing to have “little or no substance.”

Lucy Smith, managing director of Clarity Umbrella agrees.

“When a contractor looks at a website and there is very little information available on the site, it [should] lead [them] to question why.”

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‘Question what they have to hide’
Referring to Peak PAYE Ltd but applying equally to the IFCP, Ms Smith continued: “The website is very bare, says very little and would lead me to question what they have to hide.

“If a….[provider] has nothing to hide then they should have no issues in explaining it all via the website.”

But equally, an abundance of explanations or claims, particularly those like the ones made on the institute’s website, can verge on the comical — or they would do if the risks to contractors of being hoodwinked were not quite as grave as they are.

‘Etc, etc’
Recruitment lawyer Adrian Marlowe of Lawspeed explained: “Peak PAYE [being outed] by HMRC is highly topical as tax avoidance [is] very much back on the agenda [at HMRC].

“But Peak PAYE’s website shows it is accredited by an outfit called the Institute of Freelance Contractor Professionals which claims to be [lots of good-sounding things] like ‘independently audited’, and ‘fully disclosed to HMRC.’ Etc. Etc. Someone clearly has a sense of humour.”

Neither Peak PAYE Ltd nor the Institute of Freelancing and Contracting Professionals responded to questions or written requests for comment.

By Simon Moore

Source: Contractor UK

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Contractor sector sceptical of potential tax cuts from an under pressure Boris Johnson

Contractors being potentially among the one in three adults who can afford basics but not always luxuries isn’t making the contractor sector into Boris Johnson’s whispered tax cuts.

Reportedly recommended to the prime minister as a way to heal rifts after he narrowly survived a confidence vote, any tax cuts would usually be embraced by contractors.

After all, contractors are “up against IR35 reform, dividend tax rises and [potentially] an incoming hike to corporation tax,” Qdos’s Nicole Slowey pointed out yesterday.

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‘Token gesture’
But another specialist in contractor taxation, Graham Webber of WTT Consulting, says he expects any tax cut from Mr Johnson to be only a “token gesture”.

The PM’s trying political circumstances, plus the government’s tendency to legislate against contractors rather than incentivise it via tax cuts, makes his expectation creditable.

But in a thread featuring both the tax specialists, a Test Analyst said that if any of the tax cuts resemble Spring Statement’s 5p cut in fuel duty, the government can “keep it.”

‘Forced bribe’
“At this stage [from Mr Johnson], it would be a forced bribe,” said the analyst, a self-employed contractor. “It would only be announced to make Boris look better, not to help us”.

The prospect of tax cuts has prompted Mr Johnson’s most supportive national newspaper, the Daily Telegraph, to identify a fuel duty reduction as the most important of five he may make.

The right-leaning broadsheet said a close second would be for the PM to abolish the 5% VAT charge on heating fuels — as Mr Johnson has previously promised to do.

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‘Attacks on contractors’
Yet a consultant posted yesterday that it’s not ever Number 10’s decision to cut taxes – it’s Number 11’s.

“[Chancellor] Rishi [Sunak] and the Treasury are in charge of taxes, not Boris,” the consultant said.

“[Following the many] broken promises and attacks on contractors over the last few years, it will take a lot [for either Mr Sunak or Mr Johnson] to win back support — and trust.”

‘Government handling taxation badly’
A YouGov reading of June 2nd shows 69% of adults believe the government to be handling of the issue of taxation “badly.”

Income tax is the levy which people would least like to be increased by the government, followed by council tax, and then National Insurance, the pollster found in May.

Speaking since the findings, Keith Gordon QC has pinpointed what he would most like to see in relation to the contractor sector’s most notorious tax rule.

In a phone-in with LBC about the off-payroll rules, the tax barrister said: “I hope someone will go back to the drawing board and decide IR35 is not fit for purpose.”

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‘Unwelcome letters from HMRC’
A revoking of the Intermediaries legislation is even more of an outside bet than tax cuts from the prime minister, so accountants say it’s ‘business as usual’ this tax return season.

“With tax returns on the mind of many pro-active taxpayers, something often forgotten on the tax returns of those submitting early, is benefits-in-kind,” advises Adam Dove, senior client accountant at Orange Genie.

“With P11Ds not due for submission until July 6th 2022, it is important to ensure your employer has submitted your P11D and you have the details before you complete your self-assessment tax return, to avoid any unwelcome letters from HMRC with amendments, interest and, or, penalties.”

By Simon Moore

Source: Contractor UK

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IR35 reform ‘stifling’ access to talent

The recent reform of IR35 legislation is “stifling” access to specialised talent in the UK, according to research.

Some 50 per cent of companies said IR35 was the main obstacle to hiring contractors in the past 12 months.

This has led to 70 per cent of businesses and recruiters seeing a reduction in their limited company contractor workforce, according to a survey of 1,200 contractors, recruitment businesses and end clients in February this year by Kingsbridge Contractor Insurance.

The same percentage of contractors will now only look for roles that are outside IR35 rules over the next six to 12 months, despite these accounting for 41 per cent of roles on offer.

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Two thirds (66 per cent) of contractors said they would not even consider a role inside IR35 rules.

Paul Havenhand, chief executive of Kingsbridge Contractor Insurance, said the UK economy is “being hampered” by a severe recruitment crisis.

“Contractors, as a highly skilled, flexible resource, could be providing a much-needed interim solution to keep things working and avoid major disruption to UK businesses,” he said.

“But there has been a 11 per cent drop in working contractors in the last twelve months.

“The complexities of IR35 and perceived risks are putting businesses off.”

The research was conducted for Kingsbridge, as part of a whitepaper called ‘IR-35 – One Year On’.

The white paper said half of recruiters surveyed feel that end clients were not prepared for the reform in the private sector, which Kingsbridge said suggests that “further education” is required.

Furthermore, it said HMRC’s Employment Status for Tax tool (Cest) is ‘not fit for purpose’ and is ‘hampering business growth’ by blocking access to contract labour.

“Recruitment agencies who reported that their end clients use Cest have seen a larger reduction of limited company contractors engaging in providing services compared to independent employment status tool users,” it said.

This was based on 38 per cent of the recruiters surveyed who said their end clients who use Cest have seen a 61 per cent or greater reduction in their contractor pool, compared with 23 per cent who use independent employment status tools.

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One criticism of the tool was that it produces indeterminate results 21 per cent of the time.

An HMRC spokesperson said: “HMRC will stand by Cest’s results provided accurate and correct information is used, in accordance with our guidance. The tool was rigorously tested against case law and settled cases by officials and external experts.”

Legislative reform

IR35 is a tax law that was reformed in April last year to require the end client, and not the contractors they hire, to decide if the working relationship resembles a self-employed engagement or employment. As part of this reform, the fee-paying party (either the end client or recruitment agency) now shoulders the liability.

The aim of the reform was to stop the promotion and misselling of disguised remuneration schemes, however the legislation has received criticism.

In April last year, the All-Party Parliamentary Loan Charge Group said the government needs to accept the “obvious reality” that IR35 legislation is “fundamentally flawed”.

The group said while it understood and supported the aim of stopping employees from seeking tax advantages for falsely claiming to be self-employed, the IR35 rules had “ironically muddied the waters and unintentionally made it harder, not easier, to define contracting and freelancing”.

An HMRC spokesperson said: “The off-payroll working rules ensure that individuals working like employees, but through their own limited company, are taxed like employees.

“The changes that took effect last year ensure that rules which have been in place since 2000 are applied correctly. We consulted extensively on off-payroll working and are continuing to deliver an extensive education and support programme to help industry and contractors implement the reform.”

“How an organisation decides to engage its workers remains a business decision for organisations to make.”

By Sally Hickey

Source: FT Adviser

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