Private Sector: Don’t Ignore 2020 IR35 Changes

12 March 2019

Large and medium sized private sector organisations have just over a year left to prepare for important changes to IR35 legislation.

When similar changes were introduced in the public sector in April 2017, many organisations were woefully underprepared. In the most serious cases, public sector organisations made costly errors and saw major projects delayed.

Getting ready for April 2020 requires effective leadership and co-operation across departments and business areas.

In this blog post, we will provide a brief introduction to the changes before detailing what different teams can do to prepare.

Off payroll working in the private sector

Announced at the Budget in 2018, off payroll working in the private sector will extend public sector IR35 reforms to the private sector.

This means that, where a contractor works through an intermediary like a personal service company (PSC), the responsibility for judging whether an engagement falls within IR35 will move from the PSC to the end user.

If an engagement is judged to be ‘inside IR35’, the end user (or the agency that pays the PSC) will be responsible for implementing PAYE and National Insurance liabilities on payments made to the PSC.

This new regime will only apply to large and medium sized businesses that engage contractors through PSCs. The smallest 1.5 million businesses will continue to operate under the current rules.

Senior leadership

Senior leadership and finance teams need to create a strategy to respond to the IR35 changes and measure progress up until and beyond April 2020.

This difficult process must start by seeking to understand the gravity of the reforms - including any cost implications - and assigning responsibility for different parts of the implementation.

Tax

People involved in taxation will need to delve deep into the legislation to understand the full consequences of the change and any associated risks.

While at face value this may seem straightforward, these teams should also pay attention to how IR35 plays against other legislation like the Criminal Finances Act 2017 and Senior Accounting Officer legislation.

Procurement

Procurement teams will be on the forefront of the reforms. They must investigate the full workforce and evaluate suppliers and methods of procurement.

Procurement may also need to identify critical team members on current and future projects and account for these in any budgets.

IT

Organisational IT tends to be heavily reliant on contract work. For many organisations, the IT function may need to be treated as a special IR35 case if contractors are needed to finish important projects.

HR

The HR department may need to take a more active role in the recruiting and onboarding of contractors. Asking individual departments to recruit and manage their own contingent workers may lead to difficulties further down the line.

HR will also need to be responsible for communicating changes throughout the organisation and speaking to contractors about how they will be affected by the changes.

Failure to communicate with contractors effectively could undermine your business relationship and result in the loss of important talent.

Get help today

Public sector organisations did not have long to prepare for the IR35 changes. The 2020 introduction is a lifeline for private sector organisations, but it’s important not to stick their head in the sand.

Failure to implement a solid IR35 strategy could result in compliance issues with HMRC or problems with business-critical contractors who may feel undervalued.

For help and advice on IR35, speak to a member of the Umbrella.co.uk team today. Call: 0800 121 6513.