For contractors, being wrongly placed inside IR35 is unnerving – but also has the financial implication of affecting their take-home pay.
As a recruiter, you may find that you need to support a limited company director through an incorrect IR35 determination. If you’re unsure where to start, below, we aim to help you through the process.
IR35 Changes: Public and Private Sector Reforms
April 2017 saw a reform to IR35 that affected the public sector. The responsibility to determine the IR35 status on assignments in public sector organisations shifted from the contractor to the end hirer. The April 2020 draft reforms mirror the public sector changes onto the private sector; our article outlines all the changes. Within the latest reforms, we see the introduction of the Small Business Exemption - an effort from HMRC to ease the administrative burden on smaller companies. As such, the April 2020 reforms will only apply to medium and larger companies.
How to assist a contractor who has been incorrectly placed inside IR35
- Get in touch with an IR35 specialist
As a recruiter, your forte lies within finding great talent, identifying gaps in the market, sourcing great end hirers, and matching the two together. While it may seem daunting to determine if the contractor has had their assignment correctly or incorrectly deemed inside or outside IR35, our in-house team is here to help with IR35 reviews.
IR35 specialists have vast experience, industry knowledge and can provide you with trusted advice that you can feed-back to the contractor.
- Speak to the end hirer
Reaching out to those who deemed the contract inside IR35 will allow you further insight into what led them to their decision; was it one small clause that you could ask them to re-word, or is it a factor that you (as well as the contractor) may have overlooked?
It could even have been an order from higher management that has been followed through without further consultation.
Speaking to the end hirer can help clear the air, build your relationship further, rectify an incorrect IR35 determination, or allow you to provide a clear answer to the contractor as to why they have been deemed inside IR35.
If the contract remains inside IR35 after reviews suggest otherwise, it’s important to remember that the determination is still the responsibility of the end hirer. However, HMRC require that the end hirer exercise reasonable care when making this determination.
There are no formalised appeals processes currently, but the April 2020 reforms will see the introduction of the client led mediation process. SDS (Status Determination Statement) and debt transfer provisions will apply equally to public sector and private sector organisations – read more about this topic here.
How can we help?
1) IR35 contract reviews – we mentioned that referring your query to an IR35 specialist is the best way to get expert advice. ClearSky Accounting (our sister company) can help you with this, and can be reached at 0800 464 0372, or via email on email@example.com
2) Umbrella Company option – if you’ve had the contract reviewed, contacted the end hirer, and there’s no getting away from the determination that the assignment is inside IR35 – you can advise the contractor that opting to work under an umbrella company such as ourselves at Parasol will eradicate their dealings with the intricacies of IR35.
Having the contractor as our employee means we’ll handle the administration, calculate tax and NI contributions and make payments to HMRC. At the same time, they can expect to be paid swiftly and accurately, and there will always be someone available to talk to if there are any queries or concerns.
You can get in touch with us by filling out the form below, or reaching us at our Agency Support centre, by email on firstname.lastname@example.org, or phoning us on 01925 645 275 from Monday – Friday, 8am – 6pm.
Our Recruiter Resource section also provides valuable insight and guides. We’re with you all the way.