IR35 Reform – How much is your talent worth!

15th October, 2019

Blanket Decisions, Inside or Outside?

What is the potential true cost to your business with the IR35 Off-Payroll Reform in the Private Sector?

So we enter the final 6 months before the IR35 Off-Payroll Reform enters the Private Sector. Before we hit the nuts and bolts of this article I feel it prudent to point out that this is not an article about the changes the Reform will bring, but rather, I hope an education piece for businesses to still make, calm, educated and sensible decisions in relation to the reform.

First things first as I have been hearing this on countless occasions, lets get some important facets out of the way. The IR35 legislation itself is not subject to any change whatsoever, nor (as it currently stands) is the Reform going to be postponed a year, I lost count the amount of times I heard delegates talking about this at the recent Recruitment Expo in Birmingham. Whilst the Budget has just been announced for November 6th, I believe I would have more chance of winning the Euromillions then there being a postponement, however we can never say never!!!

Guidance to protect you biggest business asset

Quite simply put, it is guidance to protect the biggest asset any business has and that’s their Talent! I see and hear countless businesses’ talk about protecting their talent and doing everything they can to ensure that their talent is their priority and yet due to the impending IR35 Reform I am seeing more and more decisions being made or implemented where that said talent is actual potentially going to be lost! How you may ask?

HMRC Investigates

Now let me first applaud HMRC here! The recent news that HMRC are currently investigating 1500 contractors from GlaxoSmithKline was shall we say perfectly timed. 6 months before the reform takes effect, the domino effect from this was that many other businesses would suffer from the thought of being in the dreaded HMRC spotlight. We have seen with Barclays, Lloyds and HSBC to name but a few, that in their opinion for this not to happen, that the best course of action for them is to “engage” their contractors or contingent workers directly or via a PAYE model. After all if no status determination needs to be made, then the likelihood of HMRC investigations is significantly reduced. All the time a win, win for HMRC, as all workers would be PAYE. Any surprise that more and more businesses are looking at going down this route! I think not, so touche HMRC for those scare tactics!

HMRC CEST

The same can be said for those businesses that are using the HMRC CEST (check employment status for tax) tool to determine their IR35 Status. This is a tick box assessment tool, which is proven to be floored!! The percentage of assessments where a determination can be made is 85%!! What happens to the other 15%? Indeed I tried to complete CEST the other day and it didnt even let me get past question 1, before determining I was inside IR35! Worst still Judges have stipulated that this is not an accurate tool to determine someones employment status!! It is prudent to point out that HMRC have said they will be releasing an upto date CEST tool shortly. Irrespective of this, in its current guise how does something so flawed help a business do anything bar ensures their “workers are inside IR35”? Again win, win for HMRC!

The reality of IR35 Off-Payroll Reform

The reality with the IR35 Off-Payroll Reform is that there is undoubtedly going to be change required. There will be those “workers” who have determined themselves to be “Outside IR35” that will now be required to be “Inside IR35” and indeed will be deemed an employee, but that was the whole purpose of IR35 in the first place, so that those “workers” who should be operating as an employee would be subject to the same levels of Tax and NI. However that shouldn’t be the case for everyone and indeed its those “workers” that currently dont compliantly fall inside IR35 that are important!!!

We have worked with a number of clients over the last 6 months, on average (some percentages were higher and some were lower) we have found that 72% of their “contractors” will fall inside the IR35 legislation, but the other 28% can STILL operate outside the IR35 legislation. Its simply a case of education. HMRC have for many, many years instructed “contractors” to carry out an IR35 status review on a contract by contract basis, for reasons that are best served not going into now this has for all intent and purpose generally not been followed as a collective within the industry. So the Status Reviews (for those businesses that haven’t decided to go with a blanket decision) that are now going to be part and parcel of their assessment process are actually nothing new.

How to protect your talent

I speak to contractors and businesses every day and the advice is simple. “Contractors”, “Workers”, “Contingent Workers” or whatever the terminology you use to describe your temporary work force don’t need to be lost to panic, blanket decisions or flawed tools. You can protect your talent and still ensure that this is done so in a completely compliant manner, whilst having full transparency throughout your supply chain. Those companies that are taking the time to make calm, sensible and educated commercial decisions are those that are actually putting their talent first. Most importantly these companies are the ones who don’t risk losing their talent elsewhere and indeed to will continue to grow and attract the best talent in the marketplace after the reform is introduced.

If someone walked into your business now and cut 15% of your workforce, how would that affect your business? In fact lets say just 5%? The reality is that contractors will be lost (we are already seeing movement) from those businesses who have made such blanket decisions, what is the impact really going to be for the business when this happens. Worst still what happens if your biggest competitor was actually able to entice that 5% to their business because they have taken a measured and educated approach to the IR35 Reform? In any other light of day we as business owners and leaders simply would not allow this to happen. In the cold light of day, if you placed your top talent “Inside IR35” (employee) and your biggest competitor could ensure they could compliantly remain, due to the educated approach they’ve taken, “Outside IR35” (self-employed) could you blame them for going to your competitor?

There is a reason that the UK Contract Market is worth over £30 billion and thats because we have some of the finest talent in the world within our workforce. We all know how hard it is to find and keep that talent, so why run the risk of giving it away when you dont actually need to! Take the time, take the right advice from IR35 Specialist Tax Advisers and protect and keep that talent we all work so hard to find!! There is still more than enough time to prepare and be ready!

Be ready and prepared

The process to being ready, being compliant and ensuring your business keeps it assets is not as painful, expensive or as complicated as you may think. If you have taken advice that still leaves your business vulnerable to talent casualties come April 2020, then take a second opinion. Orca Pay Group have sourced the advice of Qdos Contractor to assist with our clients regarding the IR35 Off-Payroll Reform. They have been the benchmark for contractors, Recruitment Agencies and Businesses for many, many years when it comes to IR35 and they are trusted by some of the UK’s and World’s largest companies.

Please also feel free to call me on 07538 645 141 to discuss your current situation with regards the IR35 Reform or email me at robert@orcapaygroup.co.uk and together lets help you keep the most priceless commodity of all, your talent!