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IR35: Why it’s best for the agency, the contractor and the client to work together

According to IPSE’s latest Freelancer Confidence Index, 59% of contractors are wary of the economic conditions ahead. Much of the concern has arisen from recent changes to IR35 (off-payroll working rules) in the public sector, which are also set to apply to the private sector in the near future.

The changes place the responsibility for determining whether IR35 applies to a contract with the government organisation that is paying the contractor. This means that although the decision will now sit with the client, the responsibility to deduct NIC and PAYE will be left with agencies, as will the probable liability. It’s therefore important that agencies are confident about their client’s decision.

The fact is that in most cases, independent professionals will know more about IR35 than their end-clients. Accurate IR35 determination takes into account a number of factors from each party in the supply chain, from the end client, to the recruitment agency, to the contractor. Without collaboration and transparency, the accuracy of any decision could be called into question. By engaging in open conversations, the three parties can help to ensure accurate and well-informed decisions are being made about the contract status.

Improved communication between clients, contractors and recruitment agencies will also help with negotiating the contract and dispelling misconceptions. For example, it is now in everyone’s interest to include clauses relating to the contractor’s right of substitution and control when applicable, and to ensure that the upper-level contract between the agency and the client mirrors the lower level contract between the agency and the contractor.

As IR35 creates more problems for the contracting sector, developing good business practice will go some way towards combating risk and ensuring supply and demand remains competitive. Clients and contractors are more likely to use agencies that provide a good service, which also means safeguarding their interests. After some rash reactions to April’s reforms, public sector clients are now anxious not to compromise their services by limiting their access to skilled contractors who have increasing means of finding work through work hubs and social media. Adopting good business practice now will help to ensure the contracting sector’s future.

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Find out more about IR35 from Contracting Scout

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