HM Revenue & Customs have taken steps to warn businesses to prepare for the controversial changes to off-payroll working rules also known as IR35.
Construction firms in particular have been told to make their arrangements for changes to the new rules. Earlier in the year, HMRC decided to delay the IR35. This was to help businesses and individuals deal with the economic impact of Covid. Construction had hoped that the new rules would be further delayed. The latest from HMRC however, has put all hopes for another delay to rest.
HMRC said: “We recognise that businesses are facing difficult challenges due to Covid-19. They are providing information and support now to ensure businesses have plenty of time to prepare.”
HMRC & IT
HMRC are facing calls to urgently tweak the incoming tax avoidance reforms from the IT industry. This is following the discovery of a clause within the legislation that calls into question the need for IT contractors to engage with clients via umbrella companies in the future.
With just six months until IR35 reforms, valid concerns have been raised about the clause. Experts claim this could prove to be problematic for IT contractors who provide services via umbrella companies if left unchecked.
UK contractors by the numbers
The IT and Construction industries are not alone in their grievances with IR35. A study conducted by Insurance service provider Qdos found that almost up to 45% of contractors in the UK will continue contracting via a personal service company regardless of the reform. 18% are now considering closing down their business as a direct result of IR35. 17% may choose to turn down employment in fear of being in breach of the new legislation.
This data highlights the split opinions of UK contractors. Seb Maley, Qdos CEO, stated, “While nearly all contractors want to carry on working via their personal service company when reform arrives, not all independent workers believe they will be able to. This is likely to stem from their experience in the public sector and from blanket and risk-averse decisions already made by private sector firms.”
The Qdos’ survey also discovered that as much as 6% of contractors may take the decision to retire as a direct result of the reform, whilst 14% have ‘other’ plans, ranging from starting a new business or expanding their current one.
Of those who expect to stop contracting next year, 75% have said this directly correlates to IR35. Meanwhile, 75% have stated that they have no faith in their client to correctly determine their status. At the same time, 21% were unsure and 4% said they do hold faith.
A potential solution?
Here at ENGAGE, we have been well aware of the concerns that IR35 has created amongst contractors and businesses across the UK. We have witnessed the complex and strict nature of this legislation first-hand and have seen how many are unsure of how to position themselves and their contractors before April 2021. So, we asked ourselves, what can we do to help businesses prepare for the incoming changes.
After months of internal meetings and an incredible amount of dev work, we have developed our IR35 risk management tool which enables businesses to have full visibility of your worker engagement through all levels of the supply chain, including workers who are engaged via Umbrella companies.
With ENGAGE you can quickly identify placement’s that are most at risk with our colour-coded tags. Our platform will provide you with an overview of any potential issues your organisation may face as well as a suggestion of how to address them.
You can automatically calculate the level of risk within your placements. As our platform updates you whenever there’s a change to a worker’s engagement or a position’s status.
At ENGAGE our mission is to make contingent working easy and accessible to members of all sectors empowering you to be the best you can be.
To learn more about how ENGAGE can help you please click here.