Don’t Let IR35 Compliance Shut You Out in the Cold
If you’re an independent contractor within financial services, you’re likely keeping a close eye on the latest IR35 compliance developments ahead of the changes coming into force on 6 April 2020. You may well have seen that some major banking organisations are now opting not to extend the projects of contractors who provide their services via a personal service company, limited company or other intermediary beyond early next year.
An estimated 900,000 UK-based limited company contractors could be impacted by the April 2020 IR35 changes, when it becomes the responsibility of the engager business to define the IR35 status of their contractor workforce. Rather than shouldering this new responsibility, why are some financial organisations opting to take an umbrella ban approach and what can contractors do to avoid losing work?
As part of Procorre Next10, a new initiative that champions contractors and provides a supportive voice for the industry, we surveyed over 500 contractors and 500 UK HR professionals to examine the state of play ahead of the April 2020 deadline.
Since the changes to IR35 regulations in the private sector were unveiled, nearly half (47%) of HR Managers said they’ve been ‘drowning in paperwork’. 50% said they’ve found it difficult to concentrate on other tasks, and that planning for the changes has ‘taken over their time’ (47%).
If you’re wondering what’s causing these issues, which could potentially be a deciding factor with some businesses introducing a blanket ban on certain contractors, our contractor research reveals a number of insights.
For example, invoicing multiple clients throughout the tax year is more likely to help a contractor retain their career contractor status. However, when it came to surveying the scope and nature of contractors’ activities, we found 57% work on a sole client contract at any one time, while one in ten said they hold management duties over employed staff.
If a contractor is also based within the office of one of its clients, they are more likely to be considered an employee under the eyes of the new legislation. Alarmingly, nearly a quarter (24%) of those surveyed work solely on site for their client.
Adding to this, 65% of contractors said they don’t need approval for time off, but over half (53%) confirmed their client picks the days, hours and locations they work, despite their contractor status. In addition, over half (52%) of the contractors surveyed said they use equipment provided by their client. Although they cited cyber-security concerns as the reason, this is still potentially problematic, adding to the administrative burden of the clients’ HR departments who must now ensure compliance.
Taking the above into account, it’s not surprising that the majority (84%) of HR professionals are worried about the drain on resources administration could have, should they look to retain their current pool of contractor talent.
Naturally, HR professionals are concerned about the added workload, but ultimately the big picture is that many (67%) feel that after April it will be harder to recruit the necessary skills for their organisation. The majority (68%) are also worried that highly skilled contractors will be driven abroad to the advantage of their competitors.
Procorre’s position on the findings of the research is that there is no ‘silver bullet’. Both engager organisations and contractors alike need to be making the necessary preparations for April 2020 to avoid losing access to valuable skills and client projects respectively, but it’s a case of taking a pragmatic, sensible approach.
We are working with our contractors and clients in the private sector to ensure that the due diligence and process is in place for a smooth transition and we encourage others in the industry to do the same. The contracting industry and the flexible workforce it’s made up of is still a major contributor to the economy, so we’re hopeful that any changes will be applied fairly.
To learn more about the Procorre Next10 initiative or to download the full research report, visit www.Procorre.com/Next10
As a global consultancy that facilitate the deployment of domestic consultants and experts on a mass scale, we have worked closely with third party compliance experts to prepare for the Intermediaries Legislation (or IR35).
We ensure that our consultants are able to work on client projects compliantly with the changes, providing assurance to both our experts and our clients. To learn more about our offering, which is specifically tailored to the Financial Services sector, visit https://www.procorre.com/investment-management/