Executive Grapevine | Executive Grapevine International Ltd

The recent Lorraine Kelly case should act as a warning for recruitment agencies…

The main challenges for contractors in 2019

With further IR35 reform just around the corner, Recruitment Grapevine takes a look at the big issues facing UK contractors and freelancers.

As of April 2020, the much-debated update to intermediaries legislation will mean that private-sector companies have additional responsibility when assessing an individual’s employment status as part of the compliance process. It’s proven to be a controversial step.

From HMRC’s perspective, they say this update is necessary to help flush out ‘hidden employees’ and ensure income tax and national insurance payments are fulfilled. HMRC has also recently stated that they will not be looking retrospectively for non-compliance, which avoids targeted campaigns concentrating on previous years.

Either way, there is an air of panic and confusion surrounding the update. Several high-profile tax cases have already been brought forward by HMRC, which leaves most contractors worried about being mis-labelled.

What can we learn from the Lorraine Kelly debacle?

“To many contractors, the news of Lorraine Kelly’s IR35 win would not have come as much of a surprise,” says Seb Maley, leading IR35 Adviser and CEO of Qdos. “At £1.2million, the sheer sum of money involved was, of course, rare, but the fact that HMRC has targeted yet another genuinely self-employed contractor is sadly becoming common practice.

“For contractors, the case should serve as another reminder of the importance of being confident in IR35 status, irrespective of the fact that before long independent workers will not be the party administering the rules. This matters because working inside can cost a contractor anything up to 30% more in tax.

“For recruitment agencies placing contractors, it’s a similar situation. After all, from April 2020 they will be the party held liable for mistakes made in the private sector. To be able to continue attracting contractors while, at the same time, protecting the liability they will carry as the fee-payer, it’s crucial they are ready to assist end-clients with well-informed and ultimately compliant IR35 decisions. Inevitably, this is causing concern among many people within the industry, particularly those who have watched and experienced the chaos that unfolded upon the arrival of similar changes in the public sector in 2017.”