IR35: one year on

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If you were to believe everything you read in the run-up to April 2020, you’d be forgiven for thinking that IR35 reform was to be the meteor shower to private sector contracting’s dinosaurs. It was game over, end of the road, time to pack up and go home. Private sector contracting just wasn’t going to weather the storm.

None of it has proven to be true.

Even after a delayed introduction as a result of the pandemic, the horror stories that covered the business pages simply did not happen. Tweaks were made, contractors adapted and resourcers provided solutions. While some employers, inevitably, abandoned ship because of the scare stories, private sector contracting is still going strong. So, what happened?

Contractors ran for cover

The number of private sector contractors working in IT and telecommunications fell from 130,000 in 2017 to just below 100,000 in September 2021. Despite the decline, it is still a sizeable talent pool, but the House of Lords believes that many are disguising themselves by working with umbrella companies.

The House of Lords has been the most vocal section of government on the impact of IR35 reform – and it isn’t best pleased. On top of its harsh claim on contractors, it has also condemned the government’s own Check Employment Status for Tax (CEST) tool by saying it isn’t fit for purpose. 

Whether the legislation is patchy or not, contractors and employers have spent the past year with little choice but to do what was asked of them – and they’ve done just that.

Recruiters came into their own

When the changes first came into play, recruitment Consultants and agencies were all too often left out of the conversation. But they – well, us included – have a vested interest in getting it right for their contractors, their clients, and themselves. Speaking to recruitment Consultants when dealing with a contract workforce, or when seeking your next contract, should now be considered essential.

Not only do they provide specialist solutions and platforms to assess the requirements of a particular contract, but recruitment agencies also act as a support system for contractors. They don’t have unions, colleagues, or an HR department to run things by. Recruitment agencies have been able to step into this role, providing both information and support to contractors as well as guiding employers through the process of engaging contract talent correctly and diligently.

But we’re just getting started…

After its year-long delay, the introduction of IR35 reform in the private sector also came with a footnote. HMRC announced that there would be a ‘soft landing period’ for the changes, lasting for one year. Businesses were told that accidental non-compliance up until 6th April 2022 would not be financially penalised, giving them an additional 365 days to learn from any mistakes – deliberate rule-dodging would be dealt with, however.

So, from here on in, its action stations. HMRC will be hot on the heels of anyone fitting its ‘medium to large-sized business’ criteria that are failing to correctly determine whether or not their contractors are operating inside or outside of IR35 legislation. But it shouldn’t be cause for concern because we’ve seen in the past year that the changes are far from disastrous – they just need to be properly managed.

Recruitment agencies, like us, can help. We produced an IR35 Readiness Report last year, and our IR35 platform takes the hassle out of your contract determinations and removes any element of risk when hiring limited company contractors. By engaging with specialists and seeking help from the experts, IR35 is far from the minefield it is made out to be.

develop are a specialist software engineering recruitment agency, specialising in identifying and placing both permanent and contract talent at businesses ranging from exciting start-ups to international organisations. If you are looking for guidance or support with IR35, get in touch.

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