Don’t miss out on skilled contractors post iR35

Skilled Contractors

Most businesses are aware of the changes that are being made on 6th April 2020 to the off-payroll working rules (IR35). These rules determine if an individual is working as a true contractor or is acting more like an employee. 

When the changes to the (IR35) legislation come into force next month, it will shift responsibility for operating the rules to the organisation that engages the worker. To make sure that an individual who works in a similar way to an employee, but through their own limited company, pays broadly the same Income Tax and National Insurance contributions as those who are employed directly.

What is the impact on businesses?

Shifting the responsibility to the company will mean that companies will need to determine the status of the worker. Which has in some industries shaken up how businesses are going to use contractors going forwards. Many banks such as Barclays are taking a hardline, by stating that they will no longer deal with off-payroll contractors and will shift them all to Pay As You Earn (PAYE). 

“20 per cent of UK businesses are axing contractors completely in order to ensure they are fully taxed compliant ahead of IR35 changes”

Harvey Nash

This is very concerning for contractors who wish to continue at a company where they have been working outside of IR35 prior to the change.  It could mean HMRC will retrospectively look at their engagement which could mean tax could be owed if the role was incorrectly assessed.

Can you still employ contractors?

Yes, it is still perfectly fine to employ contractors there is no need to panic, but companies will just have to make sure they determine whether the contractor is working inside or outside of IR35. If you are unsure you can check the status here on the website

When contractors are outside of IR35 the hiring company will pay the contractor them in the same way. If IR35 is applicable, then the company must ensure that taxes are deducted from their pay and they will need to be paid through a PAYE system.

However, these hardline approaches are somewhat short-sighted and they do not take a modern global approach on how you can engage with contractors.

Taking a global view 

When companies start to embrace a global workforce, utilising distributed teams and remote workers, some of the risks of IR35 can be negated. As if IR35 applies, the tax and National Insurance position will depend on the tax residence status of the worker, the client and the location in which the duties of the contract are carried out.

If the worker is a non-resident working for a UK company and carries out their duties full-time overseas and doesn’t set foot in the UK, then they are not liable to tax in the UK. Not only will this approach enable your company to not fall foul of IR35 rules, but it will give you a broader global talent pool from which to source your digital talent. 

Here at Prodigi, we believe in the future of the globally distributed teams to bring greater cultural richness to organisations, greater access to digital talent and a more dynamic remote workforce.

Going forwards it will be extremely important that companies are fully aware of how to correctly manage their contractors, so these new rules do not ruin the progress of projects or even businesses.

Gain expert advice

We have been working with the IR35 rules since they were created back in 2000, so we can provide you with expert inside knowledge of how to set up your contractors correctly.  We can keep your projects moving forward and provide you with fully vetted and qualified contractors from our global network. Get in touch today to discuss your requirements.