IR35 reform delay: frequently asked questions

IR35 changes postponed due to COVID-19, but how does this impact contractors?

One of the many measures announced by the Government in response to the COVID-19 crisis was to delay IR35 reform in the private sector by one year.

As a contractor, you will retain the right to determine your IR35 status for 12 more months when working in the private sector. Medium and large businesses will become responsible for administering IR35 on 6th April 2021, which is the date on which you will no longer carry the liability - the fee-paying party will be transferred this.

In light of the current circumstances, that the Government postponed these changes has been widely welcomed by contractors, recruitment agencies and private sector firms. However, given changes to the off-payroll working rules were due to be enforced next month, many contractors have already had their IR35 status assessed by their client.

Along with outlining what to do in this scenario, we’ve answered a number of other important questions for contractors in this article.

I’ve been placed inside IR35, what now?

While clients will not become responsible for IR35 until next April, you are advised to discuss your inside IR35 status with them or the agency you work through. In response to the changes, some businesses made a policy decision to only engage PAYE workers, meaning they no longer offer outside IR35 opportunities.

You should also get in touch with your client and or agency if you’re now engaged through an umbrella company, on a fixed-term contract or classed as an agency worker and would like to revert back to PSC contracting. This is because in the above scenarios, the IR35 legislation doesn’t apply and you will have signed a new contract with different terms. 

Is it risky to revert back to outside IR35?

If your client had enforced a PAYE only rule on certain roles, it may prove difficult to convince them to accept outside IR35 working. However, if your client is open to the idea, there is nothing stopping you from transferring back outside IR35.

In this situation, given you had been placed inside IR35, reverting to outside the rules carries with it an element of risk. There is a possibility that your client could stand by the factors taken into account in the original decision - and your client’s response is considered in an IR35 investigation.

Therefore, we advise contractors who switch back outside IR35 to only do so after ensuring they can evidence their position, such as having their contract reviewed by an expert.

I’ve been blanket assessed, can I change my client’s mind?

Potentially. Dozens of large businesses have already reversed their decision to blanket place contractors inside IR35. However, you mustn’t assume anything and therefore, we urge you to contact your client and or agency for an update on the situation.

I’m outside IR35, does this still stand?

An outside IR35 determination from your client may be important in evidencing your status as a genuine contractor. That said, you are advised to find out how your client came to this conclusion. If a decision was made based on an answer given by CEST, it’s worth having your contract reviewed independently by an IR35 expert for peace of mind.

What if I haven’t been assessed by my client?

Your client isn’t obliged to determine your IR35 status until 6th April 2021, so legally speaking, you do not need to do anything other than ensure your own IR35 compliance. It’s your responsibility to decide your IR35 status and protect yourself from the risks of the legislation.

Can my client still set my IR35 status?

Assessments will have no legal bearing before 6th April 2021, but some companies may decide to continue with the process given they have already started. In other words, businesses might look to use determinations as a way of setting policy decisions on certain roles.

As explained earlier, receiving an outside IR35 decision from your client could prove important in strengthening your status.

Do I still need IR35 insurance?

Given you will carry the IR35 risk for another year and that HMRC can investigate contracts that took place up to six years ago, IR35 insurance will continue to offer contractors peace of mind, covering the costs of advice, defence, resulting tax liabilities, interest and potential penalties.

Qdos will continue to answer any questions you may have regarding the delay to IR35 reform. Please don’t hesitate to email [email protected] or call our IR35 experts on 0116 269 0999.