The era of ‘great resignation’ was all about unplanned reinventions and the high-profile IR35 changes introduced in April 2021. IR35 or off-payroll working rules are designed to work out whether a contractor is someone who is genuinely self-employed or is ‘disguised’ as an employee, to pay tax. IR35 changes introduced public sector rules to the private sector, shifting responsibility from the contractor to the client.
IR35 is also known as intermediaries’ legislation because it applies to workers who provide their services through an intermediary; rather than working as an employee.
As of now, IR35 impact paints a bleak picture, not just for freelancers and hiring companies, but the Treasury too. British firms now outsource talent overseas, reflecting the nation’s employment rate and the digital divide, yet things could radically change for contractors later this year.
“426 respondents surveyed said they had moved to permanent work due to IR35.”
It is not wrong to say that the impact of IR35 has been pushing contractors across a variety of sectors into fixed-term contracts on less money, imposing a major financial strain on families with the ever-rising cost of living in the UK.
“41% were out of work for six months or more following the roll-out.”
As per the new updates, clients in both the private and public sectors need to show they have taken reasonable care when working out IR35 status. Both large and medium-sized businesses are responsible for working out the contractor’s employment status, not the contractor. Both public and private sector clients need to give their contractors a Status Determination Statement which can be disputed if the contractor disagrees. In general, IR35 won’t apply if the contract is for services rather than employment so make sure whether the contract specifically mentions supervision, substitution, and mutuality of obligation (MOO).
More criteria to consider when working out IR35 status is:
1. Equipment: If it is provided by the client or not.
2. Financial Risk – There’s usually a requirement to have professional indemnity insurance.
3. The way you are paid – project-based or at a particular project milestone
4. If within the organization, contractors become part of a company’s structure, with people reporting to them -, this points to employment rather than self-employment
5. Exclusivity – The self-employed can work for multiple clients.
6. If you have a business website, a dedicated office space, and even employees, you could be seen as operating a business and not offering your services the same way as an employee.
Make sure to clarify your relationship with the hirer and before starting a contract, consider all the points above. 2022 is where the unplanned reinventions get intentional.
Before you start working, you should seek expert IR35 advice.
Visit our website: www.dss-recruitment.com for more information.
Also, visit https://www.gov.uk/guidance/check-employment-status-for-tax for more details.