Five things to consider when managing IR35
By Reed Talent Solutions
Despite the current challenges businesses are facing due to COVID-19, HMRC is encouraging them to prepare themselves for the changes to the off-payroll working rules, known as IR35. These changes are due to come into effect in April 2021 - after being postponed for 12 months.
The government legislation is designed to ensure contractors operating under Personal Service Companies (PSCs), who would otherwise be classed as employees, pay broadly the same tax as employed workers.
Navigating the legislation changes can be complex for any business under normal circumstances, but in the middle of the current crisis, planning for change can be challenging. With this in mind, these five considerations will set you in good stead to tackle the legislation head on:
1. Identify your key stakeholders and obtain buy-in
IR35 will affect multiple departments, so it is a good idea to engage all key stakeholders early in the process. To succeed and obtain buy-in, along with driving the change and supporting difficult decisions, senior sponsorship is important. You should aim to bring your hiring managers with you on the journey, make them aware of the importance of the situation, and ensure they are engaged in the decision-making process.
2. Due diligence on your current position
Tackle the situation head-on and thoroughly identify who and where your PSCs are. By mapping out the functions and projects within your organisation that rely on PSCs, and testing the water with initial determinations, you will have a clear understanding of where the highest risk lays.
3. Defining your approach to determinations
Take a consistent approach to status determination to ensure fairness. Consistency is vital not only in the process you adopt, but in who carries out the strategy and interpretation of the legislation.
4. Mapping out the consequences of your decisions
What is going to happen to the contractors determined inside IR35? What is your approach to rate negotiation and what your business can afford? How will your approach affect your ability to attract flexible talent in the future? These are all to consider when looking at the outcome of your decisions.
Without effective communication throughout the process to all your affected stakeholders, your efforts could easily fall by the wayside. Being fair, open, and honest, as well as communicating the explanation behind your decisions, will be key to success in achieving the outcomes you need.
However you approach the legislation changes, make sure you do it as effectively and efficiently as possible. With the government needing to recuperate their pandemic expenditure as the situation calms, surveillance around taxes and IR35 could be high on the agenda. So, by ensuring you have a robust approach to IR35, you will eliminate future risk.
Reed Talent Solutions is experienced in guiding organisations through these changes and protecting them from risk. For further advice and guidance on how to roadmap your journey to compliance, visit our dedicated website made in partnership with Consultancy+.
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