As it’s now less than 6 months before IR35 is introduced I thought it would be a good time to provide an update following my presentation I did at the IR35 conference held by Lawspeed the other week.
It was encouraging to see many agencies were aware of the changes and attended the conference to get into the detail of what action they need to take from 6 April. I was impressed that someone from HMRC was also one of the speakers and he handled himself very well when he was showing the updated beta version of the CEST version even though he did get asked some very difficult questions.
The main point that I felt needed to be shared and action taken now, is the need for the Client to perform an SDS (status determination statement) which needs to follow certain parameters, they include:
This SDS brings more responsibility to the Client as they now have to communicate the determination down the chain, they need to retain evidence of their decision, provide the evidence to the PSC or agency and deal with any appeals by the PSC within 45 days. However, the legilsation is not very clear what needs to be done if the worker is still not satisfied with the results of the appeal. I would guess we will have to wait and see how this works in reality, and if the decision is changed from a net to gross payment how the worker, goes about getting his tax refund. The extra admin involved in providing such a statement by the Client for each Worker is going to be a logistical nightmare, however it must be made very clear to the client that until the SDS has been provided, the Client will stand in the position of the fee payer, resulting in them being responsible for ensuring the correct tax and NI has been paid.
Don’t forget that an SDS is only required if the Client is classed as a large employer. If the Client is a small or medium business then the new legislation does not apply to them and they can continue as they currently do.
The second point that I feel needs to be addressed is the fact that with only 6 months to go before the legislation comes into force, is that any new contracts over 6 months need to be reviewed now and a short contract to 5 April 2020 should be put in place with a new contract after 6 April 2020 if the PSC is caught by IR35 and the Client is a large business. In my presentation I did not too long ago, I talked about the financial effect on the Worker and the Agency if nothing is done now and the Worker is paid the same rates as previously after 5 April 2020. I made it very clear that this is not an option and would be a disaster for both the Worker and Agency as they both would be financially worse off.
Finally, I can see some agencies making the most of the introduction of the SDS and maybe providing this service at a fee of course to ensure the Client is legally compliant, and together with the much improved and updated CEST available by HMRC to help with determining the status of workers, I’m hoping the agencies are up to speed with the new legislation and starting to put systems together to ensure the smooth transition from 6 April 2020.
Lee Manning – Partner
For recruitment advice or any more information on IR35, contact lee at firstname.lastname@example.org.