Changes to the off-payroll legislation that have been rolled out to the private sector have long been a source of worry and outright fear for some people. Contractors are still trying to figure out how these new rules will affect them post rollout.
These new rules state that those who are not engaged by a ‘small’ company must now rely on their engager to determine their employment status. This means that umbrella companies, end-users, and many other people without much in the way of qualifications for this task are determining status for contractors.
Larger clients are forcing contractors to work through umbrellas or become employees, and blanket bans have been enacted by some larger sectors that typically hired contractors. This all makes for a working reality fraught with change and questions that cannot be answered.
What Happens to PSCs?
Those working through a PSC usually have the most questions about what will come next for them. If you are only working on contracts that fall outside of IR35, then everything should be business as usual for you at this point. If you have any jobs that are not outside of IR35, things might get more complicated for you from here.
Contractors who want to work through their PSC now that IR35 has been rolled out will need to ensure that their contracts all fit the new IR35 rules and regulations. They must also be aware of blanket bans that might be in place for their current engagers.
If any of the contracts that a contractor is working on fall inside of IR35, HRMC could decide to verify that all of your work processes are compliant. This can lead to lengthy investigations and possible taxes being demanded due to incorrect pay that was received.
Dual Contracting
This new solution to the difficulties many contractors face may or may not provide the help that is being hoped for. If a contract is deemed outside of IR35, but there is the option to transfer to an umbrella company set up, this will allow contractors to continue working with engagers now that the rollout has taken place.
This may become the most popular arrangement for contractors and clients overall because of the flexibility offered and the clearly worded rules of the arrangement. This can be compared to the difficulties of trying to establish the correct status without having an option to fall under an umbrella.
Umbrella Companies
For many contractors, umbrella companies will remove the risk of poorly educated end clients determining their status. The umbrella should be able to handle this determination, as well as the NIC that should come out of the contractor’s pay. This can be more difficult if the umbrella is not prepared for the changes that have taken place, but overall it may be the best solution for many contractors.
You may have to pay more tax and larger NIC contributions when working through an umbrella, but you will also get access to employment benefits like sick pay and employment rights.
Long-Term Plans are Key
Contractors will need to look realistically at their long-term goals now that IR35 is here. You might be fine with working through an umbrella, but this may not suit your needs due to the kinds of contracts you are working on.
If all of your existing contracts are outside of IR35, you should not need to make any changes other than reviewing your contracts to ensure they are compliant.
For contractors who are not sure of their status inside or outside of IR35, it is long past to figure these things out and start making changes. If you are not sure that you want to work on contracts inside IR35 or are not interested in working through an umbrella, the road ahead may be rocky for you.
IR35 is full of flaws and concerning rules and regulations, and contractors will have to weather the storm as best as possible. It can be hoped that the rules will receive attention and some attempts at reform at a future date, but for now, contractors will need to navigate new ways of securing work in the post IR35 world.
