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EIA – Associate Director

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Senior Management Accountant

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    £250 / £300 Per Day Inside IR35

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  • Location

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IR35 refresher

IR35: Common Pitfalls to Avoid as an Employer

By Consult Energy
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The long awaited IR35 reform is finally upon us as of next month on the 6th of April 2021. We’ve had our ear to the ground on the private sector reform since the news broke back in 2019. In fact, we even did a podcast on it.

For anyone still wondering what IR35 is: in short, it’s a tax legislation designed to put a stop to “disguised” contractors being billed as a limited company. IR35 is used to determine whether a contractor should be taxed by HMRC the same as an employee, or as a limited company.

None of that is new information, but what has changed is that the burden of determining a contractor’s status now sits with the employer rather than the contractor. Understandably, this has had a lot of businesses wondering how to approach their contingent workforce going forwards.

If you’ve been dreading having to make changes to the way your organisation works with contractors, we’re here to tell you there’s no need to panic.

With HMRC releasing a statement on February 2021 confirming that they’ll be taking a lenient approach to genuine IR35 mistakes for the first 12 months and won’t be fining people as a result, you’ve got a lot more leeway than originally thought.

That being said, what HMRC defines as a genuine mistake could be up for debate so it’s best to keep your finger on the pulse in terms of what is and isn’t allowed. We’ve pulled together some of the common pitfalls employer could fall foul to when it comes to determining your contractor’s status.

Leave blanket determinations at the door

We know they’re the quick and easy way to decide who to work with and may seem like the safest option, but hear us out on this one. It doesn’t pay to rely on role-based blanket bans, and they all impact you as an employer. Not only does it not constitute as ‘reasonable care’, a necessity when making a status decision, but they’re also uninsurable which puts you at risk. If that wasn’t enough to put you off, here are a few more reasons not to use IR35 blanket determinations as your go to method for deciding where a contractor’s role sits.

It puts strain on your in-house team

Contractors are within their rights to challenge what they deem to be an incorrect IR35 assessment, meaning that they can come back to you and appeal the decision. This means ensuring you have in-house capacity to deal with this as employers must respond to appeals within 45 days, you don’t need us to tell you what a chore that could become.

This may sound farfetched but since you’re making a sweeping judgement with a blanket determination, it’s very likely that you will get some push back.

It’s bad for employer brand

If you’re an organisation that works with contractors regularly, you really don’t want to be known for being slap dash with your role determinations. End hirers are far more likely to be seen as an attractive company to work for if they take care with their Status Determination Statements rather than try to avoid them altogether. Ultimately, this could result in you having a much smaller pool of contractors to choose from and impact your ability to choose the right one.

There are financial implications

Not only could your contractor get fed up, drop out and get scooped up by one of your competitors, meaning you miss out on the right person for the job but you might and suffer a financial loss as a result if you need to rehire. Furthermore you’ll need to make sure you’ve accounted for extra NIC payments in your budget. The fact of the matter is: by trying to avoid a higher end of year tax bill, you might just end up paying unnecessary NIC throughout the year instead if the contractor is actually outside of IR35 anyway.

Remember the SDS fundamentals

Status Determination Statements are part and parcel of working with contractors as of April 6th, so it’s important to get it right. This is effectively a notice of your IR35 status determination and should include a summary of how you reached the conclusion. The reasons for your decision should be outlined really clearly, but should bear in mind the below points which HMRC will be assessing:

  • Control – How much control do you have over when, where and how the work is completed?
  • Substitution – Can the contractor be easily substituted for the role?
  • Mutuality of Obligation – Are you obliged to offer the contractor future work?
  • Financial Risk – Who is likely to suffer financially should the contract not be completed?

Don’t forget, if the contractor appeals your decision you have 45 days to respond to them either overturning your determination or confirming it.

Don’t brave it alone

If you’re finding it tough to get a handle on IR35, there’s absolutely nothing to lose from reaching out to a trusted business partner that can help. For instance, we opted to partner with FCSA accredited umbrella company, Brookson, to help us take care of our contractor candidate-base.

As a recruitment partner to the energy sector, we completely understand the apprehension around IR35. That’s why we made it our business to be in the know about the legislation so we can advise clients and contractors alike on how to proceed once the reform comes into play.

Take a listen to our latest IR35 refresher podcast where our Director Kevin Tyler chats with Brookson’s Andy Holt covering off the fundamentals of IR35 and what you need to know.

If you’d like to have a chat about how IR35 could affect you and the roles you’ve got on at the moment, please reach out to us.

Back to Blog

Our latest job opportunities

Added 2 days ago

EIA – Associate Director

Job Reference: 3405

Added 7 days ago

Senior Management Accountant

Job Reference: 3403

  • Location

    Warwickshire

  • Money

    £50,000 - £60,000

  • Contract

    Permanent

Added 23 Nov 2021

Senior Application Engineer

Job Reference: 3400

  • Location

    Windsor

  • Money

    £50,000 - £60,000

  • Contract

    Permanent

Added 23 Nov 2021

Finance Analyst

Job Reference: 3398

  • Location

    Blackpool

  • Money

    £20,000 - £25,000

  • Contract

    Permanent

Added 19 Nov 2021

Full Stack Developers

Job Reference:

  • Money

    £35,000 - £75,000

  • Contract

    Permanent

Added 18 Nov 2021

Salesforce Marketing Cloud Specialist – Contract

Job Reference: 3389

  • Location

    Remote

  • Money

    £250 / £300 Per Day Inside IR35

  • Contract

    Contract

Added 18 Nov 2021

Business Development Manager

Job Reference: 3385

  • Location

    London

  • Money

    £40,000-£60,000

  • Contract

    Permanent

Added 16 Nov 2021

Operational Excellence Improvement

Job Reference: 3381

  • Location

    Nottingham

  • Money

    Up to £55000

  • Contract

    Permanent

Added 16 Nov 2021

Tech Specialist/DBA

Job Reference: 3370

  • Location

    London, England

  • Money

    £50,000 - £70,000

  • Contract

    Permanent

Added 16 Nov 2021

Business Analyst

Job Reference: 3335

  • Location

    London

  • Money

    Up to £45000

  • Contract

    Permanent

Added 16 Nov 2021

Business Development Manager

Job Reference: 3373

  • Location

    Remote with UK wide travel

  • Money

    £40,000 - £50,000

  • Contract

    Permanent

Added 16 Nov 2021

Audit and Assurance Manager

Job Reference: 3380

  • Location

    Hampshire

  • Money

    £40,000 - £45,000

  • Contract

    Permanent

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