IR35 - A Guide to Upcoming Changes

17/Jan/2020

Since its inception two decades ago, IR35 has long been a cause of contention for those falling within its remit – fluctuating legislation has understandably led to inconsistency in terms of who is determines themselves in or out, and the administration for those ‘in’ has often proved to be problematic and costly.

In a move that mirrors changes applied to public sector engagements back in 2017, from 6 April 2020 the goalposts shift again with some significance with the onus of determining ‘in’ or ‘out’ shifts from provider to receiver across the board.

Clearly this has implications to the contractor whereby the control of their position in respect of IR35 legislation becomes compromised, and whilst the changes only apply to receivers that are medium and large companies the majority of IR35-sensitive cases relate to engagements with these type of entities.

Experience from the public sector change suggests that organisations could (and indeed did) take a blanket view that all contractors providing services via a limited company are deemed ‘in’ regardless of their individual circumstances and applicability to the IR35 legislation, the party line on rationale being efficiency (in not having to judge each case on its merits) but the reality seeming to be risk mitigation against the pitfalls of getting it wrong.

That said, from a contractor’s perspective where this isn’t the case, the shift of exposure to liability for misinterpreting complex legislation and avoidance of penalties associated with that may be welcome.

Ultimately the point for contractors to be aware of is the scope for current and future engagements and the means by which they are taxed thereon could change in a decision beyond their control – it is therefore vital that contractors hold conversations with receivers of their services as soon as possible to obtain clarity going forward.

If you are concerned that the changing legislation may affect you (and how), please contact us to discuss further.