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IR35 reform

Latest IR35 Guidance Offers Little Comfort to Contractors

We’ve already discussed how the IR35 reforms are potentially damaging for contractors – and how this has been demonstrated by Transport for London’s decision to introduce a blanket ban on workers operating through their own limited company.

Since then, however, the government has published some updated guidance on the IR35 reforms.

Unfortunately, this not only fails to address concerns with the reforms – it actually introduces new ones.

Perhaps most notable is the confirmation that payments made to contractors after 6 April, for work they completed before that time, will fall within the scope of the reformed rules.

This means public sector bodies paying a month in arrears will have an effective deadline of 6 March to ensure compliance.

And, for those with longer payment terms – perhaps 60 or 90 days – contractors will already be affected by this decision.

 

The risk of retrospective action

It’s not just payment after 6 April 2017 that can cause contractors to be unexpectedly caught up in the reformed rules.

IPSE requested an amnesty for contracts that overlap into the new system but HMRC has refused to offer this assurance.

On top of this, if a contractor has been found inside IR35 under the new system, experts have warned there’s a real risk that HMRC will subsequently investigate their affairs prior to 6 April 2017.

 

How can contractors respond?

Time is of the essence for contractors who wish to get their affairs in order.

  • For those contractors who invoice one month in arrears, they must issue invoices on or before 6 –March to avoid an excessive tax bill.
  • As another precautionary measure, contractors should consider requesting weekly or even daily payments to minimise the losses they could face.
  • It also makes sense to begin renegotiating a new contract now, whether this is with an agency or public sector body.

Here at Contracting Scout, we’re continuing to monitor for developments around the new legislation.

If you are concerned about  how these changes might affect you, we’re offering contractors a free 10 minute consultation.

Our Scout representatives will be able look at the potential impact to your take home pay, along with a number of options to help you get the most from contracting or protect yourself from falling into the IR35 trap unnecessarily. If this is of interest, please get in touch.