Navigating IR35: Ensuring Compliance with a Flexible Workforce

Posted — Wednesday 26.11.2020

Tax and payroll can be complicated areas of finance for many organisations, particularly for those that hire contractors and self-employed workers. New tax reforms are coming in for many people who fall into this category of worker, and businesses with contractors at their heart are set to be impacted.

A flexible workforce is a huge benefit to many organisations, enabling them to deliver their services at more competitive prices. But IR35 reforms, the UK’s anti-avoidance tax legislation for contractors, is set to change how businesses manage their contractors moving forward. 

Despite the COVID-19 pandemic, HMRC is still planning to introduce these changes from 6th April 2021. From then, businesses will be responsible for determining the employment status of their contractors, and must inform HMRC about whether individuals can be classified as employees.

Businesses that do have a largely flexible workforce may find that complying with IR35 is going to be a significant challenge as there will be a lot of information that needs to be processed and managed to determine the employee status of each contractor. Having a clear understanding of the changes, how it impacts an organisation and having a clear audit trail for HMRC throughout this process is going to be critical.

Simplifying a complicated process

Understanding IR35: The Importance of a Clear Audit Process

A clear audit process is crucial in preparing your business for the IR35 reform. It ensures that you and your finance teams comprehend the new responsibilities and how they might impact your workforce structures.

Navigating IR35 with PCW’s Support and Advice

At PCW, we offer businesses the support and advice needed to navigate IR35, ensuring business continuity and reducing potential liabilities that may arise from non-compliance.

Conducting a Comprehensive Review

We can work with you to conduct a thorough review of all staff and contractors within your business, identifying those affected by the new rules. We’ll also assess existing contracts to determine the best course of action regarding your relationship with contractors.

Considering the True Cost of IR35

As many contractors may fall under the scope of IR35, it’s essential to evaluate its true cost to your business, including the additional payroll burden. We can assist you with a comprehensive cost review.

Timing is Critical: Assessing Before the Changes

With the deadline approaching, undertaking assessments before the IR35 rules change is crucial. Misclassifying contractors as employees could lead to formal redundancy procedures, which are time-consuming and expensive. We can also help you terminate work contracts in accordance with current legislation to avoid potential litigation.

Fair Assessment for the Truly Self-Employed

Fair and individual assessment is paramount to protect the truly self-employed. Some large employers have taken a blanket approach to include all contractors under IR35, leading to unfair inclusion of employees within its scope. Internal consequences may arise, such as conflicts with key staff members and potential litigation.

Recruitment Considerations: Clear Communication

When hiring new workers, businesses should clearly communicate whether the role is for a contracted period by a self-employed individual or a more permanent internal role as a consultant or contractor.

Establishing Clear and Effective Processes

Our team can help you establish transparent and effective processes to ensure compliance and avoid potential liabilities. We also ensure that contractors working with you are fully aware of how the changes might impact them.

Starting Early for a Smooth Transition

As the IR35 reforms approach, there’s much work to be done. Starting early will help your organization and workers smoothly adapt to the changes by the April deadline.

Contact Us for Support Through and Beyond the IR35 Process

Contact our team today to find out how we can help you through the process and beyond.

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