In recent months, I have of course written about Coronavirus and it‘s impact on our clients. In particular, we have been involved in helping clients who are out of work and able to make Coronavirus Job Retention Scheme (CJRS) claims. We make the claims on behalf of clients at no charge, regardless of how much time we need to spend to help clients weather these difficult times.
Just as the Government has been easing the lockdown rules, this month I too will ease off from writing about Covid and I’m sure that will be a welcome relief to you.
IR35 and the Off-Payroll rules were deferred at the last minute by the Treasury from kicking off in April 2020 to April 2021. Although the Lords committee and others such as the Institute of Chartered Accountants issued reports advising the Government that IR35 was a poorly devised tax back in April 2000 and it needed a proper rethink to make it a fair tax, it seems the Treasury is pushing on with bringing it in on April 2021. So, everyone needs to consider how they will deal with IR35.
Most end clients and agencies left the thinking of how to deal with IR35/Off-Payroll too late and were feverishly running around in February and March 2020 devising policies on the fly. This week, I saw that some end clients are now reviewing the processes and planning well ahead of April next year.
That is really good news as they are working correctly on assessing each contractor’s role in their Personal Service Company (PSC) to see if they can continue to work outside of IR35 in their PSCs, receiving gross payment without tax deductions.
The types of areas that need looking at are now familiar to most, I think. Substitution (which is always difficult to get in place), subcontracting (where the PSC brings in another professional to assist with their work, probably much more achievable than substitution), getting the project to refer to a defined scope of work, not moving to another project outside the agreed works scope without having a new contract, not working within specified weekly work hours, not requesting permission to take time off, not being instructed by the end client on HOW to complete the work (but can follow end client and industry standards), use of own equipment (prior to most people working from home in recent months, it was considered impossible for IT security to use own laptops but this may now have changed).
These areas and others are relevant for each PSC to show that it is in business and not working like a disguised employee, which is what gets HMRC so hot under the collar.
It is very pleasing to see some end clients using the deferral year, despite the Covid problems, to plan for a more intelligent and constructive review of their contracts and working practices.
It would be good for all contractors to now start to engage with their end clients and prospective end clients to prompt them to start creating new contracts, policies and working practices that will allow contractors who are properly in business to continue to operate as PSCs without tax deductions and not leave the plan to late in the tax year as was done last year, and then make hasty and unfair decisions which damage both the end client’s business and that of contractors.
Good luck with working towards a fairer contractors’ tax regime.