Are you prepared for the changes to IR35?

By now you may have heard that the UK Government is making changes to the way your business can engage IT contract staff. New legislation came into force for the public sector in April 2017 and had an immediate effect on their ability to attract the best talent, in some instances, any at all. Those changes are now planned to come into effect for the private sector in April 2020. Many of our clients have expressed their concerns about the impact to their business, and we have responded by working with legal and HR experts to create a service that protects our client’s business interests, and their customers.

Fifth Step has been delivering IT consultancy for over 10 years, and we are experts in providing IT professionals to fill skill shortages during our client’s times of need. We deliver through our permanent team of consultants and our network of associates who are a trusted part of our organisation. We are not an agency, yet as part of our business we tick the boxes when it comes staffing needs traditionally filled by contractors, only better.

With our client concerns in mind we have developed a risk-management approach that minimises any disruptive impact of the new legislation before the legal change comes into force. This means together we can prepare and respond to the law changes in a manner that will not restrict your business, and prevent you falling foul of the unknowns. So, if you’re used to the contract agency market, who are likely to fall foul of the changes, we go much further for our clients by having an internal support structure focused on supporting you, so that you can get on with running your business.

Why HMRC is changing IR35?

Most businesses rely on IT contract staff at some time or another. It’s a smart and productive way to leverage skills you don’t have, for the short term, as and when you need them. Contractors usually work via a Limited Company due to tax and National Insurance incentives. HMRC saw this as unfair because the contractor may be performing tasks as a permanent member of staff, but not paying the equivalent tax and NI.

IR35 was born in the early 2000’s to identify contractors working as what could be perceived as permanent members of staff. This left the responsibility of self-identification to the contractor! Martialling IR35 has proved almost impossible so the government has upped their game by targeting the end hirer in the chain, the company that benefits from the activities delivered by the contractor.

It's thought that contractors could lose up to 25% of their money with IR35, according to ContractorCalculator, and as a result, almost 85% said they would consider leaving the public sector to work for private companies instead, according to a recent IT Pro article.

85% of tech firms have said that IR35 will affect the number of contractors they hire, versus 73% of all businesses. Meanwhile, 61% of IT companies surveyed confirmed the changes will encourage them to reduce the number of contractors hired, versus 48% of all companies.
According to IT Pro, 62% of 500 mid-sized and large businesses questioned said the changes will force them into instigating a blanket approach with their IR35 assessments because they won't have time to assess contractors properly.

As of April 2020, the law will change to crack down on false claimants by moving the responsibility of identifying and communicating whether the contractor should be inside IR35 from the contractor, to you. This means scrutinising all aspects of contract hires, on a case by case basis. Making the judgment and then notifying the intermediary that they must stop the appropriate Income Tax and National Insurance at source. Current arrangements with contract agencies will fall foul of the new legislation, which is entirely expected by HMRC.

Why partner with Fifth Step

Fifth Step specialises in flexible, multi-discipline working practices, which means we already meet the requirements of the new IR35. However, to provide extra assurance for our clients, we have taken those requirements to the next level by partnering with lawyers and HR professionals to bring a standardised approach the legislation, which ensures it is adhered to without compromising your business or your customers.

We have an ecosystem of personnel, contracts, and tools that are accountable to you, which eliminates guesswork through a “reasonable care” framework as specified by HMRC. We maintain and test all arrangements to deliver a risk-free, non-intrusive service. Leaving you to concentrate on your business.