Government Announces 12-Month IR35 Off-Payroll Delay
The Government has announced a last-minute postponement to the implementation of the Off-Payroll Tax to the private sector in light of the recent Covid-19 outbreak, with the legislation now due to be reintroduced in April 2021.
The decision was taken following significant pressure from contractors and campaigners – and indeed from within the House of Lords – who warned that the inevitable loss of work due to the virus for contractors deemed ‘inside IR35’ and effectively forced into ‘zero rights employment’ would prove catastrophic.
“This is a deferral in response to the ongoing spread of Covid-19 to help businesses and individuals,” announced Chief Secretary to the Treasury, Steve Barclay MP to the House of Commons.
“This is a deferral and not a cancellation, and the Government remains committed to reintroducing this policy to ensure people working like employees but through their own limited company pay broadly the same amount of tax as those employed directly.”
Reaction: Delay Presents Opportunity to Overhaul Off-Payroll
Though Government has stated its intentions to legislate next year, contractors, clients and industry stakeholders will no doubt welcome the valuable time granted by the tragic circumstances. The announcement presents significant scope for greater consideration of the ill-considered measures, and further discussion over the alignment of employment status for tax and employment rights purposes, to combat the issue of ‘zero rights employment’ that Off-Payroll threatens to escalate.
“We warmly welcome the announcement that the Government has seen sense and delayed the damaging IR35 Off-Payroll Tax roll-out for a year,” says ContractorCalculator CEO Dave Chaplin. “With contractors facing the prospect of losing work with no sick pay, it was clearly the right and sensible thing to do.We thank our 2,600 campaigners for their excellent work, and we thank all the MPs who raised their concerns with the Treasury and opposed the flawed policy.
“We now must keep pushing for changes to outlaw the disgrace that is ‘zero rights employment’, and to make it illegal for firms to push employer’s taxation onto contractors. We also must push for the genuine review of IR35 legislation promised by the previous Chancellor, as part of the Conservatives’ planned review into self-employment.”
Chaplin adds: “Over the next year, it’s time to finally overhaul the discredited IR35 legislation, which everyone knows doesn’t work. Instead, we must come up with a way to properly recognise contracting and freelancing in the tax system and ensure people are either classed as self-employed or as employees with full rights and benefits”.
(SOURCE: contractorcalculator.co.uk)
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IR35 – Why Employers Need to Hope for the Best, But Prepare for the Worst
With the IR35 tax changes coming into play in 2020, the status of ‘self-employment’ may begin to seriously lose its appeal. Contractors around the country will be starting to consider moving over to the dark side of permanent employment, boxing up their idealistic counterculture, badging it a distant memory of a ‘young man’s game’.
So, as an employer, at last (it would seem) all our dreams have come true. There’s an influx of new talent seeking permanent employment pouring into the marketplace and the war for talent can finally become a thing of the past.
But beware…
The truth is there are necessary and overdue changes coming to the temporary contractor marketplace, if it were property, they’d call it market correction. But the reality is that in spite of IR35 contractors will always be paid a premium over and above their permanent counterparts. They simply had it even better because they were paying a more preferential tax rate which thanks to IR35 will no longer be the case.
So, here’s the thing. If you’re interviewing a contractor for a permanent role, keep in mind the old saying, once a c**t*****r always a c**t*****r. There’s a real risk they’re reverting to ‘temporary’ type, ‘temporarily’ abandoning the apparently sinking ship to join the good ship permanent employment to weather the storm.
Self-employment is so much more than an effective and (soon to be illegal) way to pay less tax. It is in part a lifestyle choice. Freedom, flexibility, more control over your work-life balance. At worst, possibly driven by them being unable to work for or with other people. But the multi-faceted advantages are something you need to consider.
Don’t get me wrong, if you do find yourself interviewing a contractor for a permanent role in your business you must give them real consideration. They bring a really unique breadth of experience, quite possibly amongst your competitors. They’ve also got the ability to problem-solve, work independently and think creatively. You just need to take additional measures to ensure they’re really serious about going permanent.
Prepare yourself by making the following checks at interview stage and if you hire them, post their employment:
At interview stage:
- Find out whether or not they have had contracts extended and whether there are many instances of them not completing a contract. Seek the reasons why and if possible, contact their previous employer for more information
- Be direct, ask them why they’re now considering the move from temp to perm
- Set your boundaries from the outset. Have the conversation about your expectations regarding flexibility, discuss your policies and procedures with them in detail and gauge their reaction
- Ask them about their expectations, it may be that they are looking for a more flexible role than the one you’re offering, but if they’re the right person for the job it may be worth finding a compromise
- Develop a specific set of competency questions around their ability to work in a team environment and their ability to take direct orders from senior colleagues
- As a contractor they may have become involved in providing support to other companies. This may not be an issue, but better they lay their cards on the table honestly at the outset.
Post-employment:
- A perk of contracting is the flexibility to enjoy more holidays and long weekends. Ensure you keep an eye on their attendance
- Timekeeping can become an issue if not managed correctly, they’re used to coming and going as they please, so be sure to check they’re adhering to the contractual agreements you made at the outset
- For the first 6 months, stay in semi-regular contact with their line manager and keep an eye on how they’re working with the team.
Having said all that, the war for talent isn’t just about hiring great permanent employees. There are still huge advantages to the temporary workforce and very good reasons for people to remain self-employed. Contractors can be significantly more cost effective; you can call on them as and when there’s a business need and you don’t have the additional duty of care when it comes to personal issues or benefits packages.
The bottom line is the right balance of temporary and permanent staff will be unique to each organisation. Langley James has over 20 years experience in exceptional IT Recruitment. We’re connected with some of the best talent and employers in the sector. If you need help with your resourcing strategy, or you have a business need for either temp or perm IT talent get in touch.
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