IR35 April 2020 – essential FAQs

With IR35 changes in the private sector just around the corner, find out here exactly what is happening, how the change might impact you and what action can be taken to protect your contracts and take home pay.

What’s changing?

From April 2020, the rules around IR35 in the Private Sector will be bought in line with those for the Public Sector, with the end hirer making the IR35 determination across the board and bearing the tax risk if they get it wrong.

What’s not changing?

The rules used to determine IR35 status are not changing, so in theory, if you are legitimately contracting through as Limited Company now, then you should be able to continue to do so post-April.

If your contract is in the Public Sector, the end hirer is already responsible for assessing IR35 status, and this will not change.

What will the impact be on contractors?

Our experience of the changes being implemented in the Public Sector suggest that some end hirers may take a risk averse stance, deeming a large proportion of contractors as inside IR35 as a result.

This may result in some contractors temporarily needing to work on a PAYE basis and losing the tax benefits of working through a Limited Company.

How will my client assess my IR35 status?

You client should use ‘reasonable care’ to ensure that they are making the determination based on the three tests that HMRC have laid out; control, substitution and mutuality of obligation. However, many end-clients have little (if any) IR35 expertise and as a result some businesses are making ‘blanket assessments’ in advance of April 2020 – essentially ignoring that the legislation demands they take reasonable care and simply suggesting that all of their contractors are inside IR35.

Others are using HMRCs CEST (Check Employment Status for Tax) online tool, where they answer a series of questions about the contractor’s engagement and the tool tells them whether IR35 applies.

What’s wrong with CEST?

The tool has been designed by HMRC and some therefore argue that it is weighted in their favour. It is widely considered to be fundamentally flawed (indeed, HMRC investigations have regularly contradicted their own CEST tool) and yet the decision the tool arrives at will be relied upon by your end client to determine your IR35 status.

Can I argue my case if I disagree with my client?

If you find yourself with an end-client who has either blanket assessed all contractors as inside IR35 or carries out an individual assessment but incorrectly arrives at an inside IR35 conclusion, there are steps you can take, with a ‘client-led disagreement’ process part of the legislation. You can provide your evidence to your end client who then has 45 days to respond to your appeal. For more information about the appeals process, download our IR35 Survival Guide now.

What should I do if my client refuses to reconsider an incorrect assessment?

You have 3 options:

Leave and contract elsewhere – more reasonable clients do exist

Accept permanent employment – but negotiate hard to help compensate for your losses!

Contract through an umbrella company – ideally temporarily while you dispute your case

Contract through your Limited Company – you’ll still pay tax and NI but there are other financial benefits

To find out more about the options, download our IR35 Survival Guide now.

If I’ve been working outside IR35 and now I’m found inside for the same contract, will HMRC investigate?

Caution should be exercised in accepting an inside IR35 decision from an existing client where you have previously operated outside of IR35. HMRC have said that they ‘have no plans’ to open retrospective enquiries into prior years but HMRC’s behaviour recently suggests this shouldn’t be relied upon. Our advice would be to challenge the decision with the support of your contractor accountant.

Where can I get the best advice for my situation?

A specialist contractor accountant is your best bet. At SG we’ve worked with contractors for more than 20 years, helping them through the changes in the Public Sector and are passionate about supporting the flexible workforce through the upcoming changes too. We have an in-depth understanding of the IR35 legislation and can discuss and advise on your individual circumstances for each contract you undertake. We can advise on changes to your contracts and working practices to make an ‘outside IR35’ determination more likely, and help you with evidence to appeal against an ‘inside’  determination. Every one of our clients has access to our sister company, SG Umbrella for an additional monthly fee.

Get in touch now if you’d like the re-assurance of our IR35 expertise or download your FREE IR35 Survival Guide now.