This article doesn’t cover some of the more general information, but here’s a quick IR35 refresher. Instead, we thought it would be interesting to focus on the >50% of businesses who aren’t prepared for the Reform. What 7 key challenges do they face as they look to comply? What actions can they take?
A lack of knowledge and skills internally. This presents a real challenge as businesses look to establish an IR35 strategy. To overcome this, organisations should identify an ‘IR35 Champion’. They should give them the time and access to resources they need to take the lead on all things IR35. In some cases, businesses may need to look further afield and may need to hire an expert or someone with the necessary skills.
A change in responsibility. Despite the project falling outside a typical HR Team’s remit, responsibility and ownership of IR35 will likely sit with HR. This change in responsibility means a change in thinking. Organisations will need to educate their wider HR Team about IR35, the challenges and their role in IR35 compliance.
Education and collaboration across the business. IR35 will require education of the widerbusiness, as it will involve a number of internal departments. Businesses should make sure that HR, Procurement, and the Hiring Community as well as Partners and Contractors understand IR35, the strategy and procedure. Stakeholders should be encouraged to ask any questions they may have. Collaboration is crucial.
Another suggestion would be to form an ‘IR35 Working Group’, with representatives from each of the key departments. This approach will promote regular feedback and the sharing of concerns, challenges and suggestions.
Increased cost. Changes in IR35 Status could mean the cost of contractors to organisations will rise due to increased tax contributions. There is also a strong possibility that contractors will demand larger payments to protect their take-home salary. But one cost you can look to control, is avoiding fines from HMRC for getting Status Determinations wrong. This is where a robust and well-defined strategy is key. Don’t leave anything to chance. Make sure you document all evidence and reasoning behind IR35 Status Determination decisions.
Multiple Stakeholders. As mentioned above, IR35 is a project spanning across a number of internal departments. And with that comes an additional level of risk that the correct Status Determination may not make its way down the supply chain. This challenge can be best overcome by establishing a clear set of policies and procedures as part of an overall IR35 strategy. Be clear with stakeholders from the outset. Make sure they are comfortable with their involvement, their responsibilities and deadlines. Arrange regular reviews of processes and communicate any changes clearly. When managing multiple stakeholders, it pays to foster a collaborative approach.
No blanket approach to compliance. If you thought you could adopt a ‘one-size fits all approach’ to IR35, think again. HMRC have discouraged a blanket approach and in fact, businesses who do not make IR35 Status Determinations on a case by case basis, are likely to be seen as uncompetitive. There’s no doubt that making Status Determinations will be a considerable drain on resources but by establishing a clear IR35 process, where key stakeholders are aware of expectations, roles and deadlines, the overall process can be more streamlined and efficient.
Lack of clarity. There’s a general feeling that there are a number of grey areas relating to IR35. Whilst this is a source of frustration for many, HMRC have clearly emphasised the value of transparency and recording the evidence behind Status Determinations. It might be helpful to create a central repository of IR35 documents to complement a company-wide approach to IR35, the recording of Status Determinations and the reasoning behind them. This will mean that if there’s a dispute, stakeholders will know exactly where to find all of the necessary information and documentation. Which will make submitting a written response within 31 days much more manageable.
If you need a hand with IR35 and devising a strategy or whether you simply want the pain of IR35 to go away, just get in touch. We’d love to have a conversation with you.
Find out more