As the April 2020 implementation deadline for IR35 Off-Payroll Working Rules in the private sector nears, the topic comes up regularly during my interactions with buyer organizations.
Here are a few of the key messages from those most affected by this forthcoming legislation.
Visibility is a moving target. A key challenge has been that this legislation affects all personal service company workers, or PSC workers, in the organization, whether or not they are captured within a currently controlled workforce program such as an MSP/VMS contingent workforce solution. So, locating these uncontrolled workers is far from easy. I would caution that if you do not keep track of all new PSC workers entering the business, then your discovery and assessment activities will never be completed.
Interim PSC ban? Some organizations — for example, Lloyds Bank and Barclays — have implemented a ban on PSC workers. I believe this is good practice in the short-term, as it makes the discovery and assessment of existing PSC workers to be a finite and quantifiable task, rather than an endless and ongoing one as highlighted in my first point. If the business can sustain its delivery objectives, then I believe that an interim ban on PSC workers, to allow time to get good governance and processes in place to ensure any new PSC workers are correctly classified is a good policy.
Business risk and cost assessment. When this legislation was rolled out in the public sector, many PSC workers with transferable skills had the option of migrating to the private sector, rather than have their take-home pay impacted by changing classification. The rollout to the private sector closes the circle and precludes a similar option for them. Thus, organizations will have to consider the business risk and potential increased costs should PSC workers insist on higher levels of pay to offset the increased tax and social security contributions that will inevitably be incurred as a result of a change in their classification status. Some organizations believe the majority of their current PSC workers are misclassified, so this assessment of business risk and cost adjustment needs to be thought through very carefully.
HMRC visits and worker communications. In August, HMRC accused GlaxoSmithKline contractors of IR35 offenses, and wrote to some 1,500 PSC workers who were either currently or previously engaged by GSK. HMRC is also visiting a number of organizations to educate and assist them with preparations for April 2020. While these rules are not retrospective for employers or staffing firms, HMRC are still entitled to pursue PSC workers for past tax and national insurance liabilities under the original IR35 legislation, even though they may be correctly classified come April 2020.
The new status check tool … when? HMRC has an online assessment called the Check Employment Status for Tax tool. An update had been expected by now, but the current estimated availability is not until January 2020. Even if the new tool was available now, it will only ever give a view as to whether the PSC worker is likely to be inside or outside of IR35 based on the information entered. HMRC have said they will stand by the result if the information used to make the assessment is accurate. HMRC has up to six years to challenge an assessment if they believe it to be wrong. A number of organizations are creating their own assessment tools, which is a viable option, assuming your organization has the bandwidth to do this and the tool is based on full awareness of HMRC guidelines, is continually updated and are workers reassessed where necessary.
CWS Council members may reach out to me to discuss any of this further; we will also have a comprehensive Q&A session on this topic during our in-person European CWS Council meeting on Monday, Nov. 18. CWS Council and SIA corporate members also may access our report, “Guide to Implementing IR35 Off-Payroll Working Rules.”