What is the current status of the IR35 Tax Legislation reform?
On March 17th 2020, all business’ IR35 road maps ceased, while the country prioritised more pressing issues.
After months of speculation any hope that the reform was going to be scrapped faded after MPs approved the 2021 delayed rollout in Parliament. Further development cannot yet be ruled out and we await clarity around the reform from the courts as the binding authorities release, yet it appears that the Government have made it clear it will be going ahead and that businesses should implement the changes required for the ‘Off-Payroll Working Rules’ reform on 6th April 2021.
What is changing for businesses?
Currently in the Private Sector’ tax status’ is determined by the ‘Contractor’ or rather the person providing the services. Private sector contractors assess and decide whether the IR35 Tax Rules apply to each of their contract engagements. The decision not only takes into account the written contract but also various other details, such as Mutuality of Obligation, Control and Financial Risk.
From April 2021 it will be the responsibility of the entity using the services of the worker, e.g. The ‘Client’, to make the tax status determination and whether IR35 applies.
The draft legislation also introduces the statutory concept of a “Status Determination Statement” or “SDS”, which clients will be required to provide down the supply chain to ensure that it is received by the worker. This SDS must not only include the decision of the client’s “deemed” tax status of the worker, but also the rationale for reaching this conclusion.
What does it mean for IR35 Projects and businesses?
Due to the complexities of the reform, businesses should be clear from the beginning that their IR35 project will span across several departments including HR, Tax and Procurement. Usually these type of tax legislations sit outside of HR’s remit, yet as the reform changes the responsibility of making tax status determinations, this also requires a change in thinking. HMRC stating that businesses cannot adopt a ‘one size fits all’ approach along with the unfamiliar ‘Status Determination Statement’ cause further compliancy risks, therefore it is key that clear policies and procedures should be implemented, communicated and managed across the multiple stakeholders.
What impact will the reform have on businesses during COVID-19 and its recovery?
The reform does not mean that businesses cannot work with specialist contractors, however it is vital that over the coming months businesses prioritise their IR35 reform projects. This will ensure they are compliant when utilising the highly skilled resources that they will urgently require through 2021 to support their business recovery.
What does it mean for r10, their associates and clients?
r10 is IR35 compliant. We provide outsourced services to our clients, therefore, under the new off-payroll working rules, r10’s clients will not need to make a tax status determination and the responsibility falls to r10 as the Consultancy.
How do you help clients be IR35 compliant?
r10’s IR35 project management focuses on the key risks the reform gives rise to. From non-compliant fines to the education of key members of staff, r10 outline a clear roadmap for businesses requiring assistance in implementing processes and procedures to ensure they are compliant by April 6th 2021.
During these unprecedented times r10 want to highlight to businesses the impact these legislative changes will have on their people.