With the IR35 private sector reforms now certain to go ahead this April, preparedness and advanced planning will be crucial throughout the contracting supply chain in ensuring a successful adaptation to the new rules.
Here are some of the key steps that businesses should be taking to ensure they are ready for the new rules.
- Establish a steering committee to lead IR35 preparations, formed of representatives from HR, sales, legal, IT and senior management, if possible. This committee can handle impact assessments for a business’ contractors and clients and also the preparation and implementation of the business’ IR35 strategy.
- One of the biggest lessons from the implementation of IR35 rules in the public sector in 2017 was how challenging consultants found it to educate themselves on the new rules, communicate with clients and provide the right advice for contractors within such a tight time frame. Providing the right internal support to consultants ahead of the new rules will therefore be key.
- Conduct a supply chain review and communicate with clients to identify which contractors are likely to be within the scope of the new legislation and determine which contractors have sought-after or transferable skills and which don’t. Once these things have been worked out, communicate with clients regarding contractors who may be classed as within IR35 and may seek to increase their rates or leave.
- Ensure clients are aware of the reforms, what they mean, the possible implications for them and what their options are. Clients will absolutely need to know about assessments, potential cost increases, loss of talent, delays to projects and the risk of employment right claims if a contractor’s status changes.
- Review and determine what software changes or updates may be necessary to accommodate the correct payroll and accounting for contractors classed as within IR35. Alternatively, consider using a compliant, fully-audited umbrella company.
- Consider what changes may need to be made to contracts, policies or marketing. If contracts are overlapping with the new rules (which come in on April 6th), then businesses should plan around these. Other factors, such as invoice discounting and insurance, may also need to be adjusted.
- Assess whether it may be advisable to supply contractors though other means, such as an umbrella company, or through methods like SOW’s, consultancies or outcome-based contracts.
- Make sure clients and contractors are aware of schemes that competitors or providers may offer that could put them at risk if they are tempted to use them. Ensure that they are aware of HMRC’s Spotlights scheme, as well as legislation such as the Criminal Finances Act (CFA) 2017.
- Businesses should also seek to reduce their own risk and ensure compliance by reviewing and mandating their approved supplier list (PSL) for umbrella companies and accountancy providers.
- Partnering with compliance specialists will help provide support for businesses as they prepare for the changes to come into effect. Those that are best-prepared for the new rules will also be in the best position to gain a commercial edge by attracting clients and contractors.
Author: Steven English