Chancellor Rishi Sunak today delivered his much-anticipated Spring Budget 2021 Statement, setting out how the Government will extend its economic support to reflect the “reopening of the economy”.
In terms of issues directly impacting the flexible labour market, perhaps unexpectedly, there was no mention of the off-payroll (IR35) reforms in either the Chancellor’s speech or in the detailed budget documents (other than an expected tidy up of the IR35 legislation, including to clarify that an umbrella company would be exempt from the new rules, as originally intended). This is a clear indication that the Government see this reform as done and dusted, with the IR35 legislation already being finalised and HMRC ramping up their education programme to ensure businesses are ready for the 6th April 2021 roll out. This is a further indication that there will not be an additional delay and the IR35 changes will go live on 6th April.
Whilst we aren’t surprised that there were no last-minute changes to IR35, we are disappointed that despite HMRC and various stakeholders in the market encouraging businesses to be ready for these IR35 legislation changes. Large proportions of private sector organisations have failed to prepare adequately for IR35 regulations, even with an unusually long lead-in period.
Despite the Government providing more than enough time to allow businesses to prepare for the IR35 legislation changes, which will see hirers given the responsibility of who decides on IR35 status, we are surprised by the number of large private sector organisations who have not addressed these IR35 rules adequately to support their valuable flexible workforce. We continue to see businesses banning the use of personal service companies (limited companies) all together, or blanket assessing all of their flexible workforce as being “disguised employees”, without offering them any employment rights.
In our previous Budget output blogs, we warned that end hirers and recruitment businesses who fail to manage their new obligations could face serious commercial IR35 implications for contractors, whilst those who continue to support genuinely self-employed contractors will benefit significantly from this change. With the 6th April 2021 deadline looming, this warning could never be more true.
Whilst HMRC have committed to taking a light-touch approach for the first 12 months of these IR35 changes, they will still expect the correct tax to be paid and mistakes could be costly. Only time will tell what the full ramifications and unforeseen consequences of IR35 regulations changes will be on the flexible workforce and the broader UK economy.
On a more positive note, those businesses that have taken the time and dedicated the resource to understand their supply chain, assess IR35 status correctly and implement IR35 compliant payroll provisions, are well placed for working under the new norm with minimal disruption. Brookson Legal has helped hundreds of private sector end hirers and thousands of recruitment agencies to navigate these IR35 legislation changes through audits of their workforce, providing IR35 contract reviews and assessments of incumbent contracts and managing supply chain compliance. This work will continue post-April as these accounting services for contractors will enable BAU in a flexible workforce.
For contractors who are still in the dark about how these IR35 changes will impact them, now is the time to speak to your agency and end hirer to understand their plans for April and instigate the process to ensure your IR35 contract is fairly assessed. If you have been found to be working an inside IR35 role, you should carefully consider your options going forward and avoid being tempted by the various tax avoidance schemes being peddled to contractors. Flexibility is now needed in the way you operate and the support of the best contractor accountants to help you to manage your inside and outside assignments will prove valuable to you going forward. Intouch Accounting customers can benefit from our unique Flex product, which allows contractors to switch between limited and umbrella working with a wrap-around of specialist contractor accountancy services, tax advisory, legal and financial services tailored to your circumstances.
More broadly, whilst it is welcome to hear of the extension to the furlough scheme to support employees and the SEISS scheme for the self-employed, it is frustrating that Government has still not provided any suitable financial support for limited company contractors or sought to make the furlough scheme suitable for umbrella company employees. Disappointingly, it appears that a large chunk of the flexible workforce continues to be overlooked by Government.
For more information about our expert contractor accounting services including getting your contract reviewed for IR35 changes and specialist IR35 accountancy for contractors, call us on 01202 232497 or email firstname.lastname@example.org.