Hiring companies: millions of freelancers’ fates are in your hands come April 2021
On 6 April 2021, contractors in the UK will lose the right to set their IR35 status when engaged by medium and large private sector companies. This will become the responsibility of the company engaging the worker, with the liability transferred from the contractor to the fee-paying party.
So what now?
That means, the contractor or freelancer must ensure that they have their status in order before a client freelancer contract expires or they make an inaccurate assessment of your IR35 status (inside or outside the legislative parameters).
Many contractors were hoping Amendment 20 to the UK Finance Bill, which would have delayed the new IR35 tax legislation until 2023, was not defeated in Parliament, but it was by 317 votes to 254. The news came out in the late hours of the 1st of July, providing freelancers and contractors little solace in the midst of one of the worse economic downturns in modern history.
“The fact remains, however, that the government has a strong majority and is fixated on passing this damaging legislation,” says the Association of the Independent Professionals and Self-Employed (IPSE).
IPSE says it wants to assure its members and freelancers at-large that it will not stop applying pressure to the government to get them to change direction on this. “We will press the case that now is the worst time to push the damaging changes to IR35 onto an already under-supported and struggling freelance sector.”
IR35: moot and ready for the boot?
IPSE sees the changes to IR35 as a “patch for a taxation system that is ill-designed to deal with the modern and changing workforce”.
The passage of this Finance Bill and its changes to IR35 legislation is disappointing and a setback, according to IPSE.
In a statement, the association said it would work towards sparking a much larger discussion about creating a modern tax system that works for self-employed people.
“Rest assured that we are already pressing ahead in this wider discussion, working hard to get a fair deal for freelancers.”
Private-sector: putting freelancers’ fate in their hands?
According to Seb Maley, Qdos CEO, IR35 reform in the private sector has effectively now been “signed off” and will arrive in April 2021.
“Despite concerns raised by a number of MPs, who rightly exposed the flaws of this legislation and made it clear they do not believe changes are necessary, it seems there’s no turning back now,” said Maley.
“The reform is short-sighted and if mismanaged poses a risk not just to contractors but to hiring organisations and recruiters. It’s therefore up to private sector firms to prepare for the changes, which can be managed with the right approach. However, work must start immediately – I can’t stress enough how important this is,” he says.
For companies to compliantly engage genuine contractors beyond April 2021, Maley suggests that they must avoid risk-averse policy decisions and instead prioritise fair and considered IR35 status assessments.
“Whilst our work alone shows that thousands of businesses will be ready for the changes, many other companies – from banks to oil firms and pharmaceutical giants – should rethink how they plan to manage this reform,” says Maley.