IR35 guidance: five actions to take now

With IR35 changes due to take effect in the UK on 6 April 2021, Julian Ball from Paystream shared advice for employers and HR professionals in a recent CIPHR webinar

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With IR35 changes due to take effect in the UK on 6 April 2021, Julian Ball from Paystream shared advice for employers and HR professionals in a recent CIPHR webinar

From 6 April 2021, off-payroll working rules (IR35) will apply to contracts carried out by private sector businesses. With this change being introduced in just over a year’s time, over 50% of recent CIPHR webinar attendees said they have not really begun preparing for IR35. Julian Ball, legal director at accountancy experts Paystream, shares his advice for employers and HR professionals struggling to get to grip with the forthcoming IR35 changes.

1. Make sure you understand IR35 changes

After 6 April, end clients will have to determine the IR35 status of contractors’ and inform contractors or agencies if an arrangement falls inside or outside IR35. The UK government has recently announced that the IR35 changes will only apply to new contracts begun after 6 April, or existing contracts that businesses expect to continue after 6 April, and will not apply to payments for work done before 6 April.

2. Seek expert advice if CEST doesn’t deliver a clear result

End clients should use HMRC’s CEST tool to determine the IR35 status of a working arrangement. However, Ball cautioned that CEST “quite often gives a ‘we don’t know’ determination”, failing to provide a clear inside or outside IR35 result. “You do need to have a level of sophistication when making these decisions, which is why third-party experts are out there to help,” he said.

3. Carry out role-based IR35 reviews

HMRC has explicitly discouraged making blanket IR35 status determinations, although many large financial services firms have chosen to do so.

However, if you have a group of contractors carrying out the same duties, Ball said that end clients do not need to individually process and determine each contractor’s IR35 status but can carry out a role-based review instead. When doing so, Ball added that employers must ensure answers given to questions in CEST are consistent.

“We have found that if an HR person answers the questions, the contract is more likely to be inside IR35,” he said. “If a hiring manager answers the questions, the contract is more likely to be outside IR35.” If this is the case, Ball said: “get yourself a project team and where there’s a consistent approach needed, make sure you’re all briefed.”

4. State a contract’s IR35 status in adverts

Advertising contracts as being in or outside IR35 is also important, Ball said. Contractors will want to know upfront if an assignment falls inside or outside IR35, and if they can work through a limited company or an umbrella company (an employer for contractors).

5. Keep evidence of how decisions are reached

Ball recommended that end clients keep a record of IR35 decisions – and evidence of how decisions were reached – for six years. These records should be stored securely and in accordance with GDPR requirements, preferably in a central people management system such as CIPHR.

This post was updated on 18 March 2020 to reflect the delay of IR35 reform introductions to April 2021. 

Want to learn more about IR35 and the action you need to be taking? Watch the on-demand webinar now