IR35: Act now or face potentially disastrous consequences later

That’s the message to responsible businesses as HM Revenue and Customs prepares to enforce new off-payroll working rules in spite of a pre-election pledge by the Government to reconsider controversial reforms to IR35.

We have been contacted by a number of clients after they received letters from HRMC warning them of important changes to employment taxes due to come into effect from April 6.

Pre-election pledge

Speaking to the BBC in late November, the Chancellor said: “I want to make sure that the proposed changes are right to take forward. We’ve already said that we’re on the side of self-employed people. We will be having a review and I think it makes sense to include IR35 in that review.”

After the election, the Treasury announced the review would merely consider if any further steps could be taken to ensure the “smooth and successful” implementation of IR35 and would conclude by mid-February.

Confusion and concern

Ian Anfield, managing director of Hudson Freelance, said HMRC’s latest guidance had caused confusion and concern among clients, some of which had put IR35 preparations on hold against the company’s advice.

Mr Anfield said: “The letter from HMRC suggests that the review is not serious and we are back to the threat that anyone who does not have their house in order by April 6 will be facing the prospect of being hit with the tax and national insurance gap between employed and self-employed income.

Shifted the trigger

“True to form, HMRC has shifted the trigger from the facts of the matter to the process, suggesting that employers will be liable simply for failing to issue Status Determination Statements (SDS).

“In the letter, HMRC suggests using its heavily criticised and non-binding online calculator, known as CEST, to make status determinations. We would say that while CEST can be useful, it has its faults and in any case we would not suggest that anyone relies on a one-off generic test to determine status.

IR35 compliant contract

“Users of freelance consultants will also need a robust IR35 compliant contract and ongoing auditing to demonstrate that as time goes on the fundamentals of the relationship have not changed.”

From April 6, medium and large companies will be responsible for deciding the status of individual professionals and liable for any tax and national insurance contributions.

Model was upheld

Hudson Freelance enables firms to engage self-employed consultants, professionals and technicians without the financial fear and administrative burdens of IR35 reforms.

Our model was upheld in a landmark employment tribunal, reported in  which dismissed claims made by a self-employed surveyor.

Call Hudson for help

The uncertainty and confusion about IR35 has created a vacuum for bad advice. Companies are kidding themselves if they think completing questionnaires and checklists from so-called HR experts can meet these challenges from HMRC.