IR35 is a tax legislation designed to stop tax avoidance. In preparation for the change in legislation with IR35 in April 2020, we’ve been speaking to a number of our partners who are experts in this field.
We asked Jeff Blakemore at Fore Two Group what this means for business’. We previously spoke to Jeff about why contractors should prepare for IR35. This time we're asking about how best to prepare your company.
What does it mean for organisations engaging with contractors?
From April 2020 medium and large private sector companies will have the obligation to determine the IR35 status of contractors engaged via a Personal Service Company “PSC”. End-hirers will need to establish which assignments are inside or outside IR35. They will need to then pass the determination down the supply chain via a ‘Status Determination Statement”, which should also be provided to the worker personally. Until this happens, they retain what is referred to as the fee-payer liability. In other words, get it wrong and they could be liable for any underpayments and any potential penalties.
What do they need to consider in the run-up to the change of legislation?
They should consider who within their organisation needs to be involved in the project team or steering group - for example, HR, procurement, in-house legal or finance. Review the supply chain and engage with all suppliers relating to temporary staffing – recruitment agencies, MSPs etc. Establish a clear picture of their current contractor population and the models they are currently operating e.g. PAYE (agency or umbrella), PSC, statement of work etc. Who is essential and non-essential? Review budgets and working practices. Consider engaging with specialist contractor accountants and other industry experts to assist with preparation such as considering contractual changes and make decisions on engagement models.
How can they keep up to date with the latest advice?
There is lots of info out there on the likes of social media, the .GOV website as well as many other specialist accounting and contracting blogs and forums. In my opinion, end-hirers who work with great suppliers should be able to rely on those industry experts in the temporary labour market to keep them updated and assist with preparation to help navigate the changes. If their current suppliers haven’t already reached out, I would suggest they need to consider whether their current suppliers are adding the value that they should expect.
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