When it comes to IR35 legislation ignorance is certainly not bliss, but this hasn’t stopped larger corporations from burying their heads in the sand and incorrectly leading with a blanket determination approach when it comes to implementing the amendments to the IR35 legislation.
Andy Ridout, Group Managing Director of Advance TRS, specialist recruiters for the built environment, speaks out to highlight the increasingly commonplace blanket approach being taken by many businesses in the lead up to the IR35 deadline.
The Scale of the Problem
Many businesses are failing to adhere to the off-payroll legislation ‘reasonable care’ requirement and instead, are making blanket determinations. In the context of a contractor facing an IR35 enquiry, taking reasonable care constitutes acquiring independent legal advice or making a full assessment on an individual basis.
Role-based ‘blanket’ assessments fail to take into account the full factual detail required to assess each individual contractor’s status accurately.
“There will always be a requirement for a correctly assessed and determined contract workforce within the project-based built environment sector. Flexible, skilled and specialist contractors are particularly necessary to deliver project-specific works, where these skills are required for a certain project phase.
Opting to move this workforce to permanent staff or incorrectly inside IR35 will lose the flexibility that has required the use of contractors to date, and will see less qualified staff cost businesses more through incorrect contracts. Genuine contractors will leave companies who incorrectly push roles inside of IR35 to the detriment of project delivery. Is this a mistake you can afford to make?” Andy Ridout explains.
These blanket determinations are an inappropriate response to the legislation, breaching the reasonable care requirement of the legislation section 61T(6)(c), insurance underwriters will not cover the tax risk unless an individual assessment has been conducted, and if investigated by HMRC, an inadequate role-based blanket assessment could trigger an extension of the enquiry window to six years due to ‘carelessness’ under Section S36(1) TMA 1970.
A Simple Solution
Advance TRS thoroughly investigated the market and what options are out there to support contractors and clients throughout the changes, and have partnered with Kingsbridge to offer free and unlimited use of the Status Determination Tool for Advance TRS clients and contractors, conducting as many assessments as required.
“Perhaps the greatest frustration,” Ridout states “is that conducting accurate assessments and determinations is both simple and achievable, with agencies like Advance TSR offering detailed support for both clients and contractors. There are excellent insured solutions for candidates correctly determined outside of IR35 mitigating the risk to all parties throughout the supply chain. We have been working with Kingsbridge Insurance to bring their exclusive, award-winning IR35 Status Tool to our clients and contractors to support them through the determination process.”
The Kingsbridge Status Tool asks between 29-34 carefully worded yes/no questions to ascertain an IR35 employment status. These questions – developed by Andy Vessey ATT, Head of Tax at Kingsbridge, qualified accountant, and a leading IR35 specialist who has defended over 500 tax investigations, most of which he has won – take a 360 view of both contract wording and working practices for as accurate a result as possible.
If it’s a clear-cut case, the tool then generates an instant determination, as well as a comprehensive report that pulls through the notable positives or negatives of your engagement. If it’s a borderline result, the answers given are passed over to one of Kingsbridge’s in-house IR35 specialists for further manual review.
Once an assessment has been completed using the Status Tool and determination has been confirmed, Kingsbridge Insurance offers an insurance policy, IR35 Protect, designed to help the full supply chain from contractor to client prepare for the 2021 private sector off-payroll reform.
The IR35 Protect policy:
- Covers the potentially crippling costs that can arise from an IR35 investigation, including defence costs, unpaid tax, interest and penalties from HMRC.
- Flexes come the reform deadline to indemnify whoever is held liable by HMRC.
- Includes exclusive access to the award-winning Kingsbridge IR35 Status Tool (Premium Protect only), making it a one-stop-shop to get ready for the reform.
- Costs just £199.50 plus Insurance Premium Tax at 12%.
“We’re currently the only IR35 solution provider on the market to offer this hybrid solution, and we firmly believe that it’s the best way to give you a quick, conclusive status result with all the support needed to guide you through the reform.” Andy Vessey ATT, Head of Tax at Kingsbridge
IR35 Protect and Legal Expenses add-ons are charged on a pro-rata basis to align with your existing policy term, although a minimum cost may apply. Find out more about Kingsbridge’s Legal Expenses and IR35 Protect policies on their website.
Just the beginning
Ridout explains that corporates looking to take an ‘easy route’ through the IR35 reform with blanket determinations are failing to see the longer-term impact of these decisions.
Aside from the obvious legal concerns surrounding blanket determinations, large corporations stand to lose out on industry talent to more agile SMEs that have correctly administered the legislation on a case-by-case basis.
“SMEs correctly assessing individual determinations and using insured solutions will gain the advantage over corporate giants, as large corporate making blanket determinations leach talent and are unable to fill roles in the coming months and years. Contract flexible workforces have evolved through necessity and project-based works still require specialist contractors to deliver specific works. There is still ample time for businesses to re-assess their determination procedure and seek advice,” Ridout explains.
Advance TRS urge clients to reach out and speak to our team of experts to access support in delivering correct status determinations before the 6th April deadline and mitigate the risk of losing critical personnel unnecessarily.
Get in touch today
If you would like a free consultation to discuss any of the content of this article, or simply wish to discuss how IR35 will impact your business, get in touch with our team.