16 March, 2020

Why IR35 is having major impact on UK digital business

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Chief treasury secretary Steve Barclay announced yesterday evening that the IR35 tax reforms would be pushed back by one year, less than a week after the controversial measures were confirmed in the Budget. 

To get a finer understanding of the issue Software Testing News spoke to our New Business Director, Richard Mort to get his opinions on what will come from the Government’s economical plan for the UK digital industry.

“The delay will come as welcome new to both contractors and companies that have not fully prepared for the legislation."

How is IR35 affecting companies and contractors?

For contractors, frustration, confusion, and uncertainty seemed to be overriding reactions last week, but they now have a year’s grace.

Contractors don’t just fear the monetary aspects and losses of IR35 coming into effect. They also have a fear of being forced into permanent roles where they lose the flexibility and choice which they previously had over future engagements. For contractors that don’t want to be tied to one company, roles in consultancy companies are an option many more may now be considered, where their own personal IR35 risk is removed, so they can continue to engage and work with a variety of companies.

How the private sector has reacted?

In the private sector, knee-jerk and negative reactions have been mostly due to a lack of understanding of responsibilities and a wish to ignore IR35 altogether. Companies now have an additional year to get to grips with how they will source roles that are affected by IR35. We have been working closely with clients who have acted proactively and in good time to assess their workforce and make appropriate individual determinations to ease the business through the changes and avoid pressures on project delivery. However, there are other companies that are still struggling.

“Organisations that have opted out of working with contractors may feel they had no other option, despite HMRC having made it clear that blanket approaches are not appropriate and determinations should be on a case by case basis. The technology sector is the one most heavily affected by IR35, so now is a great time for companies to consider an alternative option, such as outsourcing their contractor-specific work to consultancies and implementing managed services.

How to approach the reform correctly?

The most important aspect of approaching the IR35 reform correctly is for organisations to be clear about the determination of roles moving forward and act accordingly, without looking for any loopholes. There are various guidance and fact sheets published on the government website for clients, intermediaries and contractors themselves to read and get familiar with.

What opportunities do you think that IR35 will bring?

IR35 will actually bring some opportunities such as more skilled contractors considering permanent career moves, giving companies such as ours the opportunity to develop more talent in-house."


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