The public sector reforms mark the biggest change to IR35 since its inception, but it may soon be eclipsed as experts warn of an impending expansion of the rules into the private sector. This poses a unique threat to contractors.
A private sector rollout would mean, regardless of where you contract, that the IR35 compliance burden rests with ill-informed and risk-averse clients and agencies, significantly increasing your chances of being assessed as ‘inside IR35’ even if you are genuinely not caught by IR35.
But, your accountant could be key to ensuring that you avoid excessive taxation at the hands of IR35. Here we explain how your accountant can keep you outside IR35.
Why manual IR35 reviews are no longer an option
Current estimates indicate there are circa 300,000 freelancers and contractors like you in the UK whom trade via a limited company. All these need to now be assessed to prepare for the reforms being rolled out into the private sector.
This volume presents a huge challenge, because a thorough manual IR35 review typically takes up to two hours to complete, meaning an IR35 specialist working full-time could reasonably conduct 100 per month at best.
To test the whole market in a month would need 3,000 IR35 specialists - there simply aren't that many. There are maybe 50 experts in the UK who are IR35 legal experts who can test your status properly. but, it would take them 6 years to test everyone. We may not have that long, especially if measures are announced in the next Autumn Budget to start in Apil 2018.
Contractors need an alternate compliance solution. And fortunately there is one.
But what about HMRC's IR35 tool?
HMRC introduced its online IR35 assessment tool in March 2017, but there are many reasons why the ESS isn’t a suitable solution, including:
- It’s inconsistent when tested against historic IR35 court cases
- It has no legal authority
- It's underlying logic is very basic and does not align to case law
- For most contractors it cannot determine their status
- You can’t purchase insurance based on its decision
- It's biased and designed to catch you
HMRC have said they will stand by the result of their tool provided they agree you have answered the questions correctly, or that they do not consider that your contract arrangements are contrived. Hardly a guarantee, is it?
IR35Testing.co.uk - the complete IR35 compliance solution
With a private sector rollout imminent, the contract sector needs a compliance solution that is fast, accurate and affordable. Having been continually fine-tuned since its initial release in 2009, and comprising decades of employment case law expertise, our AI-powered free-to-use online IR35 test delivers an assessment akin to that of a legal expert – but within a matter of minutes.
IR35Testing.co.uk is AI powered, can bulk test thousands of contractors at a time, and is more cost-effective. Whilst IR35 specialists typically charge circa £200 for a proper contract review, you can get a free IR35 review within 15 minutes detailing a pass or fail result. And then you can purchase a detailed report and certificate of passing for £25. Then you can optionally buy tax insurance directly from our chosen insurance partner.
Arguably most importantly though, whilst HMRC targets contractors in a bid to increase its tax yield, IR35Testing.co.uk is actively geared towards helping you avoid IR35. By acting upon the extensive compliance recommendations included within your test report, you can alter your working practices to minimise your risk of being caught by IR35.
How your accountant can keep IR35 away
Assessing IR35 status requires detailed knowledge of employment status case law. Whilst some accountants have this in-house expertise, many do not. But by becoming an IR35Testing.co.uk partner, your accountant can access our tools and provide you with this expert service. Our free white label partner services empower your accountant to offer all their clients and they can sign up within minutes at no cost.
By offering you these services you will achieve more certainty over your tax position, greater insight over factors impacting your status, and assurance in the form of optional insurance offerings.
Prepare for the inevitable private sector rollout by recommending IR35Testing.co.uk to your accountant, now.