On the 17th of March, it was announced that the IR35 reform was to be delayed until 2021 in response to the coronavirus pandemic. Due to be rolled out to the private sector on April 6th, many end clients made knee-jerk blanket determinations and, in some cases, imposed blanket bans on PSCs altogether. The extra year has given private sector end clients an opportunity to rethink their position on the IR35 reform and, to the contracting community’s relief, there are signs that some are doing just that.
75% of end clients are U-turning on IR35 measures, says offpayroll.org stats
Poyser, who welcomed the news of the delay, comments on the rising trend of clients choosing to defer their approaches to the reform.
“At the moment, around 75% of clients are using this time to defer IR35 initiatives, including making u-turns on PSC bans,” he says. “Some, however, aren't and they're sticking with bans. It's understandable - for many who went hard, early, the damage has been done. It would be more problematic for them to try and reverse it now.”
“There are large clients in all industries who are deferring IR35,” Poyser continues. “BAE Systems, for example, was first out of the blocks - recruiters emailed contractors at 1 am following the chancellor's announcement, offering phone interviews and same-week start dates. Deutsche Bank also moved quickly to allow PSC contractors to continue. Sainsbury's has done a great job - not only have they deferred implementation, but they've used GDPR's right to be forgotten as justification to delete all assessments, emails and related personal information about contractors. This was welcome news given the reported flaws in Sainsbury's approach.”
It's certainly encouraging to see such big clients doing things right and using this ‘bonus time’ wisely, and should give the contracting community hope that over the next year until the 2021 reform more end clients might catch on and follow suit.
How will private sector contractors be affected long-term due to the IR35 delay?
Despite all the good news, however, Poyser did have some words of caution for contractors and clients alike.
“Contractors are drawing a breath of relief at this news, however many are now facing the challenge of CV19 and diminishing contract roles,” he says. “Contractors who were prudent built up war chests to get through IR35, which will now be redeployed should they find themselves benched as a result of CV19.”
“Clients can't rest on their laurels now. They know what will happen if they can't deliver fair IR35 assessments: in February 37% were on the bench, showing they'll vote with their feet from unfair clients,” he goes on to warn.
Our very own Matt Tyler, IR35 Consultancy Manager, warned end clients and recruiters of the very same thing upon news on the reform delay.
“We’ve all had a taste of what the changes will bring, so take this year as time to set up a proper process to allow contractors to be assessed fairly on their IR35 status with plenty of time on the run-up to April 2021,” he cautions. “The very last thing you want to do is to sit back and end up putting in place last-minute measures this time next year!”
Will we see the same mistakes made by end clients again come April 2021?
Aside from a clear shift in the right direction when it comes to end clients and their IR35 processes, James Poyser stresses the importance that contractors keep up to date and educated on how the reform could affect them.
“It's going to be different in April 2021 - the offpayroll.org.uk website serves as a guide to what will happen, client by client,” he says. “Contractors will be far more informed this time around. We're now advising our contractor clients that if come Q3/4 this year their end client is making no progress towards fair IR35 assessments then turn down contract extensions and look elsewhere, sooner rather than later. They can use offpayroll.org.uk to quickly find clients and agents who are getting IR35 right.”
Matt Tyler also reinforces that IR35 is still in place despite the reform delay and that contractors should make sure they’re taking pains to set their own employment status correctly.
“What the reform delay means for contractors in general is that after the 6th April your liability is no longer going to shift to the end client,” he says. “If you have a contract that is going to extend past 6th April that you were leaving to your end client to deal with, I would give some serious thought as to its standing from an IR35 perspective as there is now an extra year of liability you will need to concern yourself with.”
How Larsen Howie can help you prepare for the 2021 IR35 reform
While we hope that end clients will take the opportunity to reassess their IR35 process, it’s best to prepare for the worst; it’s still as important as ever to make sure you’re ready for the reform.
If you’ve been placed inside IR35 by your end client, it’s key to gather as much evidence to say the contrary as possible. We offer a contract full review or contract assessment in conjunction with a working practice review - these products all include commentary on how to improve your IR35 status and as standard come with a free re-review once suggested amendments have been made. We also offer representation from Andy Vessey should it go to tribunal, as well as training and consultation for businesses that wish to continue working with their invaluable contractor workforce.
For any further information or advice, please call us on 01163 800 400 or drop us an email. Alternatively, take a look around our Knowledge Hub for more IR35 advice, industry news, and contractor guides.