What You Need to Know About The IR35 Reform U-Turn

Confused about the IR35 announcement on October 17th 2022?

Firstly, let’s take a step back to a few weeks ago.

On Friday 23rd September 2022, then Chancellor Kwasi Kwarteng announced that IR35 reforms were to be reversed. This was universally welcomed even though caution was recommended by us at the time. Briefly this meant that determining IR35 status fell back to the contractor.

Well today that has been scrapped by incoming Chancellor Jeremy Hunt creating a lot of confusion. Let’s try to clear some of that up. So here is out recap on what you need to know about the IR35 reform U-Turn

What is IR35?

IR35 has been around for over 20 years and is not new to experienced contractors.

Qdos summarise IR35 as the following:

First issued in 2000, IR35 targets those workers considered in the eyes of HMRC to be ‘disguised employees’

Contractor Calculator uses the following description:

“IR35 is a word used to describe two sets of tax legislation that are designed to combat tax avoidance by workers, and the firms hiring them, who are supplying their services to clients via an intermediary, such as a limited company, but who would be an employee if the intermediary was not used.”

What does the IR35 U-turn mean?

In April 2021, the liability for determining IR35 status fell onto the end-client and fee payer. Below is short description on GOV.UK website:

From 6 April 2021

“All public authorities and medium and large-sized clients outside the public sector are responsible for deciding if the rules apply.

If a worker provides services to a small client outside the public sector, the worker’s intermediary is responsible for deciding the worker’s employment status and if the rules apply”

The u-turn means that this remains the case.

What should companies do stay IR35 compliant?

What you need to know about the IR35 reform U-Turn if you are a business. If you are a medium to large company you probably have awareness of IR35. Ensuring your IR35 compliance is completed by a reputable provider is a great place to start. At gigged.ai we work with Qdos and Worksome to ensure our clients are protected with the right compliance and insurance.

What should freelancers do to stay IR35 compliant moving forward?

What You Need to Know About The IR35 Reform U-Turn as a freelancer: Similar to hiring companies, it is important to work with suppliers who have strong IR35 compliance processes and can show IR35 determinations from a credible source.

HMRC use various status indicators to determine your IR35 status, the three in bold are recognised as being the most important:

• Control: Employees are usually directed on how and when to work. Contractors are freelancers should always have milestones and deliverables, not just measured by time worked. This is a key component of our Gig Creator process.

• Right of Substitution: This is a ket status test, check out this detailed article by Seb Maley.

• Mutuality of Obligations: A freelancer expects a client to hire them to undertake a specific task, with no expectation of further gigs when the project is completed. Another key component of Gigged.AI is that every project is a defined deliverable with payment on milestones. 

• Financial Risk
• Insurance
• Non-exclusivity
• Equipment

Our Customer Success Managers are well equipped to support our freelancers through the IR35 determination process alongside our partners at Qdos.

Will it change again?

At this stage it is anybody’s guess at what happens next. What is certain is working with a platform that is truly deliverable based and has in-built IR35 determinations and insurance is prudent. Gigged.AI was built to ensure outside IR35 freelancers are matched to truly deliverable based projects with in-built IR35 compliance.

If you hire tech freelancers, sign up to here:

Gigged.AI

If you are a freelancer, join our talent community for access to outside IR35 gigs here:

https://lnkd.in/eGZjaKm7