Clearly, all businesses that engage contractors and which will fall within the scope of the new rules will need to take steps to ensure they comply. Advanced preparation is absolutely essential between now and April 2021, and by taking the following practical steps will help to get things underway.
IR35 PROJECT TEAM
Forming an IR35 project team with key stakeholders in the business – for example, this may include HR; Tax; Procurement; Finance; the Senior Accounting Officer; and Departmental Heads.
Identifying potentially affected contractors from across all parts of the business.
Estimating any likely cost increases due to employer’s NIC and Apprenticeship Levy charges arising under IR35, and potential increases in contractors’ rates.
Developing and implementing new systems, and processes to ensure compliance.
Appointing a specialist partner to support with IR35 compliance, implementation and service management.
Whilst Conducting accurate IR35 status determination tests and having robust contacts in place is essential, companies will also have to consider the working practices of each engagement to ensure that what was deemed an outside engagement at assessment does not then fall inside due to the working practices. IR35 is a ‘value judgement’ and thus the above should be considered as a whole, not a box ticking exercise.
Therefore, it is important to ensure that the contractor can perform their duties with the access they require, but at each stage businesses should be ensuring that practical steps are taken to ensure they do not become involved in aspects of the business that could be considered akin to a day to day employment.
Independently they may not realise an ‘inside IR35’ determination in the eyes of the HMRC, things such as appraisals, promotional meetings and reviews should be avoided at all costs. Not involving contractors in corporate events, (unless it is deemed necessary in the scope of the performance and execution of their deliverables), and wearing a ‘Contractor’ lanyard to visually remind staff within the business that they are an external supplier, are measures that can help lead behaviours of all parties to ensure ‘outside IR35’ compliance.
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