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‘Contractor Factsheet’ published ahead of IR35 reform

IR35 Contractor Factsheet too late to make a difference?

The Government has published a ‘Contractor Factsheet’, which is designed to help independent workers get a better sense of incoming changes to the IR35 legislation

Due to be enforced on 6th April 2021, IR35 changes will see medium and large private sector companies become responsible for setting the tax status of contractors they engage. 

Similar to public sector reform in 2017, the IR35 liability will be transferred from the contractor to the fee-paying party in the supply chain - this will be either the end-client or the recruitment agency.

Released a week after the launch of the IR35 review and less than three months until reform arrives, the Government’s ‘Contractor Factsheet’ aims to answer the following questions: 

  • Who is affected by the reform?

  • What are the changes? 

  • How might IR35 reform impact contractors?

  • What can contractors do before April 6th?

However, while better support from the Government and HMRC is necessary as we approach the changes, the content and timing of the ‘Contractor Factsheet’ is disappointing. In this article, we’ll examine why the latest official IR35 guidance is long-overdue and arguably too little too late...

IR35 reform is imminent

Questions are rightly being asked about the timing of this release. Regardless of the fact that the guidance doesn’t tell us anything we didn’t already know, why has the Government waited until the eleventh hour to help contractors? After all, in just a handful of months, reform will be introduced. 

Distribution questioned

The Government has published the Factsheet on its own website, but has enough really been done to make sure this document is distributed to all contractors who will be impacted by IR35 reform? At this stage in the proceedings, the Government has arguably left it too late to offer genuine help to independent workers. 

Lightweight content

Granted, the document does direct contractors towards the Government website should they need any further information regarding IR35. That said, the guidance is lightweight nonetheless and, as you can imagine, fails to touch on the reality of the public sector experience, along with pertinent issues such as blanket IR35 determinations.

The ‘Contractor Factsheet’ only amounts to two pages and also states that contractors “do not need to take any action before April.” While this is technically correct, the Government could have explained to contractors the various steps they can take to protect their IR35 status before their client assesses it. 

Other than recommending that contractors run their engagement through HMRC’s very own IR35 tool, CEST, the Government has missed a clear opportunity - but perhaps we shouldn’t be too surprised. With this in mind, contractors can learn how to safeguard their tax position without relying on the taxman’s flawed IR35 technology. To do this, please follow this link.

IR35 failings exposed 

In its own words, the Government explains that contractors working inside IR35 will not be “entitled to statutory payments or employment rights” from their client. Again, this isn’t new information, but it exposes the unjust nature of working inside IR35 - pay tax like an employee but do not receive any employment rights in return. 

The previous Government, led by Theresa May, had said it would look into aligning tax status with employment rights, but we’re yet to hear Boris Johnson’s plans with regards to this issue. 

Above all else, the very fact that the ‘Contractor Factsheet’ has been published is another indication - after the launch of the IR35 review which aims to help with the “smooth implementation” of changes - that reform to the Off-payroll working rules will go ahead currently. 

With over 25 years’ experience, Qdos is a specialist contractor tax, IR35 and insurance adviser and we review on average, over 2000 contracts every month. Since 2000 and the introduction of the IR35 legislation, we have handled more than 1,600 IR35 enquiries, saving UK contractors over £35million in tax. 

By:Benedict Smith

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