IR35 Reform Delay

Key information for contractors about the off-payroll IR35 reform delay

The Government has announced that reform to IR35 in the private sector will be delayed by one year due to the COVID-19 pandemic. As a result, changes to the off-payroll working rules will now not be enforced until 6th April 2021.

We welcome this decision from the Government but must stress that this is a deferral, not a cancellation. It does, however, allow private sector businesses additional time to prepare for the introduction of the changes next year.

What does the IR35 delay mean for contractors?

This development means that contractors will continue to determine their own IR35 status when working in the private sector for 12 more months. As a contractor, you will also continue to carry the lR35 liability in this period.

What if my client has determined me inside IR35?

Clients do not have a legislative obligation to make a determination on your IR35 status until April 2021. However, if your client or agency has changed the way in which they engage you such as moving to Fixed Terms Contract (directly), Agency Worker or Umbrella then this will be the new basis of your contractual engagement where IR35 does not apply.

What if my client has assessed me as outside IR35 - Should I have my status independently reviewed?

If your client deemed you outside IR35 you do not technically need to do anything. However, it may be worth finding out how your client determined your IR35 status. If, for example, they used HMRC’s flawed IR35 tool, CEST, we advise you to have your contract professionally reviewed.

What if my client hasn't determined my IR35 status yet?

Due to the delay, your client is under no obligation to determine your IR35 status until 6th April 2021 - a development which they may or may not communicate with you. It is, therefore, your responsibility to ensure your IR35 compliance and protect yourself from the risks IR35 poses. Given most businesses were working off the basis that reform would be enforced this April, we advise that you contact your client and or agency to discuss the situation with them. Qdos does not control these firms’ processes.

What if my client has taken a blanket approach to personal service companies (PSCs)?

In this situation, we recommend that you get in touch with your client and or agency. You may find that your end client is reversing its decision to move contractors onto the payroll and that you can continue operating outside IR35 for the foreseeable future. While Qdos will advise companies to rethink blanket decisions, to reiterate, this is your client’s decision.

I now work through an umbrella company/as an agency worker/client fixed-term contract - Can I go back to using my PSC?

Ultimately, you have the power to decide which mechanism you chose to work via. So you are absolutely within your rights to return to operating through your Personal Service Company. However, if you had no choice but to go umbrella, agency PAYE or fixed-term contract to keep your existing contract, your client must also agree to engage contractors working through Personal Service Companies again.

Do I still need IR35 insurance?

IR35 insurance will continue to offer vital protection to contractors, who will carry the risk when working in the private sector until 6th April 2021. This means HMRC will hold you liable should they find you have been incorrectly working outside the rules. Even when reform is enforced, HMRC can investigate contracts that were completed six years ago. Insurance can cover the costs of representation, tax liabilities, interest and penalties imposed by HMRC and any fees resulting from an IR35 investigation.

As the situation unfolds, we will continue to update this information.