28 Weeks Later….

 

The offices of London are deserted, contractors are logging in from remote locations to avoid the virus, recruiters roam the city streets looking for braaains / new business…

28 weeks ago we were still in the midst of the pandemic and a new scourge of contractors and recruiters alike was on the horizon – IR35 reforms in the private sector – and this time the HMRC was serious

Together we worked to understand the new regulations, educate clients, carry out CEST assessments, amend contracts and explain that whatever the contract said it was down to the actual working arrangements. Recruiters across the land were doing the IR35 hokey cokey – inside, outside, undetermined but inside. LinkedIn was awash with articles and surveys, talk of blanket assessments, apps to show which companies were doing what, reasoning on why Pete in the Software Development team who had been with the same client for 3 years was outside IR35 just because he used his own mobile for work calls.

28 weeks later and here we are, the streets of London are busier but the battle still wages on.

We work with a variety of clients but most seem to fall in to two camps – those who were highly prepared, had done their homework, had their bug out bags packed and were ready to stick that wooden stake right in to IR35 – and those who were carrying on as they had been before, either unaware of their role in this chain of responsibility, or assuming just because their contract says its outside IR35, that would make them immune to the repercussions.

Contractors on the other hand had their pitchforks at the ready, prepared to fight to the death to preserve their Outside IR35 status. But what of those contractors now?

Recently, Simply Business surveyed over 250 contractors and the results showed over half (56 percent) are planning a move to permanent employment due to the IR35 reforms.

The results also showed 91 percent of contractors said the IR35 reforms will impact their business and of those, two thirds (55 percent) said it will have a significant impact. As the IR35 reform continues to have a costly impact, half (50 percent) believe the changes should be scrapped altogether, and two in five (38 percent) say the changes need rethinking.

som3 have seen contractors now considering permanent work as contracting isn’t as lucrative as it was, contractors who are happy if its inside or outside as long as the rate is reasonable and the work is good, and contractors who will flatly refuse to consider any roles which are inside regardless of the rate.

We have some clients who assess each role individually as they should, some who have changed working arrangements for contractors to facilitate an outside status determination and some who still say “yeah don’t worry its outside” or “just find me someone and we will work out the status later” or “I’ve got my garlic and holy water so HMRC can’t get me”. Ok, if a client said the last one we would probably slowly back away, avoiding eye contact but you get the idea.

The majority of clients do not realise or seemed concerned about the drop in take home for a contractor when their contract is inside, some offer small increases, but it doesn’t make up the difference. We can see their point to an extent – contractors are still paid handsomely in most cases compared to permanent employees, and up until recently there were a lot of people still willing to take those rates. However, those contractors do not get the benefits their permanent counterparts enjoy, or the job security, and pay more tax for the privilege due to employers NI also being deducted.

According to Contractoruk, reports have surfaced this month confirming that HMRC has already begun IR35 compliance checks in the private sector. They commented:  A key point to note is that HMRC have commenced compliance activity by focussing on the end-hirer. Many commentators considered that it would be the agency or the fee-payer that would be the starting point for HMRC off-payroll investigations. However, this is not playing out. But this too is not surprising to me, because by focussing compliance activity on the end-hirer, HMRC are focussing on the party which is responsible for undertaking the status determination and producing the Status Determination Statement. 

It is still a minefield – The Department for Work and Pensions, the Home Office and HM Courts and Tribunal Service, have each reached settlements with HMRC, after they incorrectly assessed off-payroll workers using HMRC’s CEST tool.

The CEST tool, or indeed any other Umbrella designed tools, are only as accurate as the person answering the questions – it is not a case of trying to answer them in a way that gets you the answer you want. In the last month of data – 22% of CEST assessments were “undetermined” – showing that more guidance on the tool is needed.

28 weeks later and we are getting a better understanding of the reforms and wait with baited breath on new guidance. 28 weeks later and the market has changed to a candidate driven one, and this will in turn force the hand of clients.

Whatever the next 28 weeks, or indeed 28 months throws at the market – som3 will be here to battle through!