Off-Payroll Reforms Deferred: What This Means for Agencies

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The surprise announcement on Wednesday that the off-payroll reforms will be deferred to 6th April 2021 has been received positively in the main by the recruitment industry.

Our recently conducted survey confirmed attitudes in the industry, with 84% of businesses we surveyed earlier this week saying they welcomed this move. It has also sparked much debate at what this means for contracting for the next 12 months.

Why was the IR35 private sector reform deferred?

The postponement is a result of the government's response to supporting businesses in the current COVID-19 crisis, rather than a change in government policy. The investment and resources spent on preparations to date will not be wasted and it is an opportunity for businesses to refine and continue their planning for the commencement on 6 April 2021.

Too little too late?

Many have raised concerns that this has come too late to have the desired effect. As the market adjusts to this news and the ongoing challenges presented by the COVID-19 crisis, it remains to be seen whether companies that have issued policy decisions to ban engaging with limited company contractors will reverse these decisions.

Our IR35 deferral survey, sent to our agency partners this week, confirmed that 58% of you are unsure as to whether your end hirers will reverse these bans and 21% are confident that they will not.

What if a Status Determination Statement has already been issued by the end hirer that states the role is inside IR35?

Whilst the legislation that introduces the Status Determination Statement (SDS) has been pushed back until April 2021, it would be inadvisable to simply ignore an existing SDS. If the end hirer has assessed the role on an individual basis using reasonable care, it is not unreasonable to assume that this could be used by HMRC in the event of an investigation.

Whilst it is true that the SDS is not legally binding at this point and is subject to challenge, it shows that the end hirer believes that this engagement is inside IR35. Simply disregarding this would be unwise for the contractor and potentially the rest of the supply chain.

This is not a suspension of the IR35 rules, but a delay to the reforms. If your contractor disagrees with an existing SDS they should get their contract and working practices assessed by an expert, as they would under the existing rules, to ensure they are applying the legislation correctly.

What can agencies do during the IR35 delay?

At this time, the entire supply chain must act responsibly. If the contract is indeed inside IR35 then it should be treated as such and this has not changed.

At the same time, those who introduced blanket bans to deal with the reforms are strongly encouraged to revisit their policies and use the time to take a more measured approach. Engaging skilled limited company contractors is perfectly manageable and compliant for all parties with the right contracts and working practices in place.

Where contractors are in fact inside IR35, we encourage them to not take risks and operate a deemed payment or consider alternative arrangements like a compliant umbrella or PAYE option.

When we asked if you would allow your contractors to be re-engaged via their own PSC, 68% of you confirmed that you would, with 21% undecided and only 11% stating that you would not.

There has been much discussion and debate in recent days about the risk to recruitment agencies posed by the Criminal Finance Act in circumstances where a contractor assessed as inside IR35 by the end hirer chooses to operate outside.  This may be a legitimate concern in some circumstances; however, with the right processes in place, this risk can be managed.

What’s next for the flexible workforce?

In these unprecedented times there is much uncertainty. However, one thing is clear; the UK needs its contingent workforce now more than ever and any move to make this easier for business is to be welcomed. Here at Parasol, we have all the support and expertise to successfully guide your business and contractors through these challenging times.

We have our own robust contingency plans in place and remain confident in our ability to continue to deliver our services uninterrupted. We will also be contacting contractors who we have spoken to in recent months to advise and guide them through what the deferral means for them.

With you all the way

If you have any questions about how to prepare for the off-payroll reforms, please get in touch with your account manager directly or contact us directly.