Blog | Eastridge Workforce Solutions

Are You Ready for IR35?

Written by Molly Delattre | Jan 29, 2020 8:00:00 AM

The revised IR35, which came into effect in the UK's public sector in 2017, is set to become law in April 2020. 

Intended to prevent tax avoidance under the guise of employment, the regulation puts the responsibility of determining the employment status of contractors on the end-user. This means businesses must clearly demonstrate that there is no employment relationship between them and the contractor. Here are some key criteria for proving compliance:

Mutuality of obligation

Neither the client or the contractor is obliged to continue offering/accepting contracts once a project is complete. If they were, it would be more reflective of a contract of employment, which would place the contractor “inside” IR35. (The terms “inside” and “outside” IR35 reflect whether the contractor is operating within the legislation’s scope or not.)

Substitution

As mentioned above, your organization is entering an agreement with a personal service company or private limited company, not an individual. If your contract states otherwise; that a specific contractor must see the project through, from start to finish, then it will likely fall within IR35.

Supervision, direction, and control

In cases where the client is dictating the parameters and patterns of the working relationship, for example, that the worker must work on-site, on specific days, using company-provided laptops, etc, then the contractor is likely to fall within IR35. True contractors must have control over how they complete the project.

While this may sound self-explanatory, the public sector’s experience with IR35 paints a different picture. A lack of clarity on the regulation in 2017 led to knee-jerk reactions from public sector organizations, with some going so far as to declare all contractors inside IR35.

The result? Contractor walk-outs, serious project delays, and a dramatic rise in costs.

Despite intensifying uncertainty regarding what final form IR35 will take in the private sector, there are measures your organization can act on now to ensure compliance. 

Given the expanding gig economy, more MSP and RPO clients have begun requesting alternative ways to source talent so they can remain competitive and compliant. Stayed tuned to our blog for more information.