Avoiding individual IR35 assessments? You’re doing it wrong!

So, the clock is well and truly ticking down towards the 6th April and the impending changes that are about to come into effect regarding IR35.

Whilst HMRC has clarified that determining every worker who provides its services through a PSC is caught by the off-payroll rules without giving consideration to the specific or individual facts is unreasonable care, that stance clearly doesn’t prevent organisations from making blanket policy decisions around how they engage these workers going forward.

In the last few weeks, the contractor market has changed, triggered partly by organisations that are making blanket policy decisions (not assessments), and deciding only to engage with contractors via an umbrella company and thus avoiding individual assessments. In some but not all cases, these appear to be large enterprise businesses who are either risk-adverse or avoiding the work involved in completing individual assessments. Where these decisions have been, or are being made, we are witnessing an increase in contractors resigning from assignments or putting themselves back on the market, as they strongly believe they can find similar assignments that are deemed to be outside of IR35.

I do wonder if the people making these decisions truly understand the UK labour market dynamics – the labour shortage, the skills deficit, the fact that we have the second highest employment rate in the world, the lowest unemployment rate since 1974 and 800,000+ vacancies being advertised every month – in a market where we now export more talent than we import! Surely this is where HR should be stepping up and leading the way, in order to ensure that that the organisation has a robust people plan in place? A plan that supports the business’s ability to stand out from the crowd, driving its capacity to attract and retain the talent it needs to enable its competitive advantage. We shouldn’t forget that when the HMRC published their consultation, they estimated ‘that two thirds of people working through a company are genuinely self-employed’ and thus not affected by the off-payroll rules. So why are organisations doing this?

For now, having talked to many contractors over the last few weeks, the majority appear to be begrudgingly accepting any inside IR35 status determinations or blanket policy changes. But almost all admitted to actively seeking work outside IR35, which reinforces the message that I shared in my previous blog around the imminent emergence of a real contractor merry go round.

Supporting this, findings from ContractorCalculator which surveyed 12,327 contractors revealed that 6 in 10 contractors are willing to take clients to tribunal for incorrect determinations. The research also found that 54% claim firms are unlawfully deducting their new tax bills from workers’ pay while 23% expect to quit contracting due to IR35, and 21% intend to change career.

With the current caution in the market and the added uncertainty of the Coronavirus, the next few weeks could be interesting or very unpredictable to say the least. Employers don’t have to navigate the challenges alone. It’s not too late to get in touch with our IR35 team or learn more about our resources.

This post originally appeared on interquestgroup.com