By now we all know what it is and have come to the conclusion that it’s not as scary as once thought. The legislation has come into force from April 6th with relatively little hiccups.
Have you stopped to think longer term how IR35 could affect your business?
Within this blog we will try to bring to life what IR35 means to your flexible workforce and how, in return, it could have a drastic effect on future projects if not taken seriously.
What does it mean to your contract work force?
Contractors earn a lot of money, right? They should pay their fair share of taxes, correct?
Sure there are some contractors out there that are disguised employees and have been with the same organisation for years who you could argue should be paying the same rate of tax as permanent employees. But what about your highly skilled contractors who have spent years becoming experts in their field and decide to become their own Ltd Company? They don’t get Holiday Pay or Sick Pay. They are not guaranteed work and can at times spend months in-between contracts with no income.
For a contractor to then be deemed inside IR35 this can mean a drop in their take home pay by up to 25% and in some cases even higher. This also means they will need to switch to a PAYE or Umbrella Model to ensure all tax is paid correctly. If they then want to keep their Ltd Company open on the side, there are additional charges.
How does this this effect you?
The long and short of it is cost and retention.
Skilled contractors know their worth and want to be compensated correctly for their efforts. If they are deemed as Inside IR35 you can bet more often than not they will want a rate increase to ensure they are not out of pocket.
On the other side a lot of contractors will not even entertain working inside IR35. They know how to operate outside of IR35 and want to work for a company who can allow them to be a true contractor… This could be you. By not giving a true and fair determination of a contractors IR35 status you could be hindering yourself to a smaller pool of candidates or end up paying higher. Of course, we all want the best contractors delivering our projects at the best possible rate, right?
Percentage of contractors who will work inside IR35
The list below presents data gathered from an independent poll ran by Identify Solutions.
- 45% will only work outside IR35
- 28% will work inside IR35 for an increased daily rate
- 13% will work inside IR35 for the right opportunity
- 14% will work inside IR35
As you can see from the data, if you were to solely look to recruit for roles inside of IR35 you could be limiting your pool of candidates by up to 86%. This number can be improved by offering a unique opportunity or an increased daily rate, but to get access to the whole market you would need to be offering a fair IR35 assessment to ensure you can offer outside IR35 contracts where possible.
What steps you can take
There are a few things you can do.
- The Government has put together a basic determination tool known as “Check Employment Status for Tax” or “Cest” for short. You may be encouraged to use this tool, but it is by no means compulsory and has been found to be inaccurate at determine an IR35 outcome.
- You could outsource your IR35 assessments or look to engage a consultancy to manage all of this for you. As you can imagine prices may start to climb rapidly.
- Another option you have is to partner with a credible recruitment partner who has taken the appropriate steps to ensure they can carry out a true determination based on the role and the individual contract.
This is where we can help
We understand the importance of carrying out a fair and accurate IR35 determination. We review both the role and the individual contractor via our IR35 platform so we can provide a true assessment. Should we get an Outside IR35 determination the contractor can then take out Insurance which protects the whole supply chain up to the value of £100,000 and is backed by the leading IR35 Tax expert in the UK. All SDS are safely stored on our system should HMRC ever want to dispute the claim.
Following this tried and tested approach you can:
- Continue to hire contractors outside of IR35
- Not pay the inflated rates via umbrella companies
- Have peace of mind that you are safeguarded against any future claims
- Recruit from a wider pool of skilled contractors
- Make your company more attractive to contractors
Get in touch on 02920 021050 / 02080 514777 or or send us an email at email@example.com to learn more about how we can support you and your wider contract needs: