Having been put off for two years in the private sector and four years after it was introduced into the Public Sector, we can safely say that the changes to IR35 in the UK are finally going to happen in April 2021. Obviously with the madness of the world in 2021  nothing is for sure but at GCS we are working with our clients and contractors to make sure that all parties are as ready as possible.

The key point is that these changes are an evolution. They will not stop contracting but will bring it in line with most other Western economies in the way that they consider the tax structure for freelancers. W2 payroll workers legislation in the USA, AUG (Arbeitnemeruberlassung) in Germany and WAB (Wet arbeidsmarkt in balans) in Holland are all examples of the way that governments are classifying the difference between true consultancy work and temporary labour. At GCS our international compliance is constantly working to amend our terms and setup to deal with these changes. 

The rules in these countries are probably still stricter than the UK and there is still a huge market for contractors, especially in the tech market. There are skills shortages and urgent projects that will always necessitate using external consultancy and short-term staff.

The big change in IR35 in 2021 is that if a contractor working through a limited company does not follow the right structure for paying tax and they are inside IR35 then the end-user could be liable for the cost (not the contractor as before). This rule does not apply to contractors that work through umbrella companies or agency PAYE.

It is important for companies therefore to protect themselves and prepare for IR35 and to get ready for the changes. There are many advisors out there and a variety of opinions, but the key actions are quite simple, and you can do them yourself.

AUDIT YOUR CONTRACTORS – Make sure you know every single person in your organization who is a contractor, speak to your agencies, your suppliers and your consultancies and do a full audit.

USE THE CEST TOOL TO MAKE A STATUS DETERMINATION – HMRC has put together a very quick tool for you to assess each contractor (please make sure to do it individually) and, in 2021, at GCS we have found it to be relatively friendly in terms of finding IT contractors outside IR35. Before you spend any money or use any consultancies use the CEST tool for each contractor and get a result – inside or outside.

UNDERSTAND THE PROCESS – You can speak to your agent or your contractor to understand what needs to be done with the status determination. There are also many government sites that offer help. If you follow the process carefully you can be secure that you will be effectively managing your risk.

MAKE A DECISION – It is possible for any company to decide not to use Limited Companies anymore. Some of the biggest financial services and FTSE companies have done this in the last year. If you make this decision, then you will have no potential liability for your contract workers in terms of tax, but you may find it more difficult to hire in a competitive market.

If you feel that having done this you need closer audits or determinations there are organizations that can help you, QDOS are an example. At GCS we are working with these organisations that have alternative status determination tools and have the offer of guaranteed protection against liability. You can also work with staffing consultancies such as Retinue who will take the entire IR35 project from you and do the audit, status determination and communication to the contractor population ensuring that you have experts doing the work for you. This is especially useful if you have a large population.

At GCS we are always happy to help both our clients and contractors to get through this. We have great experience in this area. But the key message is to not panic, act immediately and keep communicating with your suppliers and contractors.