By the time the IR35 Private Sector reform comes into effect in April 2021, organisations will need to have ensured they have robust processes to evaluate their contractor workforce.
Understanding how to evaluate
Identifying those contractors that fall into the IR35 assessment window is straight forward – interpreting the legislation and developing a process to evaluate contractor assignments however becomes more complex. HMRC will be looking to ensure reasonable care has been taken to come to each determination, and organisations need to be sure they have fully understood the legislation.
For those businesses who had already started preparing for IR35, the first step will likely have been to form a steering group, or project team. These colleagues are tasked with digesting the legislation and identifying changes and new processes required to ensure compliance. It’s also a good idea to seek advice from consultants outside your organisation. For many larger organisations who engage a high volume of contingent workers, implementing IR35 will become a major change management programme, with considerable financial, legal and brand reputation implications for non-compliance.
“Where HMRC is looking to ensure reasonable care has been taken, working with an external consultancy can help validate internal processes and compare them with industry best practice”Richard Hanson, Client Services Director
For organisations looking to evaluate their contingent workforce, IR35 poses a number of questions.
- Under what terms and conditions are contractors currently engaged?
- How will you capture the working practices of each of your contractor assignments?
- Is this any evidence of variations to this formal guidance when put into practice?
- What method will you use to review their working practices against the IR35 legislation?
- How will you ensure this method is used in a standard way across your organisation – with two contractors working on different projects evaluating against the same criteria, in the same way?
As new projects commence, and different contractors are engaged at each stage of the project – an organisation’s approach to IR35 must still be evident across their business post April 2021.
Should a contractor change their role or be reengaged on another project, HMRC mandates that a new IR35 status determination is created for each new assignment. The process of evaluating an organisation’s contingent workforce needs to be an ongoing process, and not a one-off project completed ahead of the April 2021 implementation date.
Our free IR35 Reflection and Readiness service is available to any business looking to assess how prepared they are to compliantly manage IR35 in the Private Sector.
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