Is there light at the end of the tunnel for UK Contractors

For nearly 16 years, the contractors and associated industry organisations such as recruiters, payroll and accounting companies have been attempting to navigate their way through the minefield of IR35. Slowly the intermediaries’ legislation has been ‘improved’ to fill the gaps it originally left and interpreted against case law to clarify its application in reality. Unfortunately, the ‘improvement’ is very much a subjective matter.

But, confirmation of HMRC’s online digital tool for status assessment could prove the start of a more objective approach that is clearer and easier to follow for contractors and associated organisations alike.

Although unclear on the details, the proposal so far is to bring in a status tool that could be used to distinguish between those who are inside or outside of the rules of IR35. A similar approach has been tried and failed, but it’s expected that a second attempt is likely to be far more useful, particularly in light of more recent legislation and additional case law. Clearly, how effective this is will be in how it’s executed in reality, but in principle and with the right consultation processes this could prove to be a welcomed step for IT contractors looking to clarify where they stand within the rules.

Initially the tool will be a mandatory way of assessing status of contractors working with a public sector body such as NHS, school, government or armed forces. And unlike currently where a contractor operating their own Limited Company (a Personal Service Company, PSC) will have to assess their own status, the role of assessment will fall on the public sector body or whichever 3^rd party pays them (e.g. through an agency).

Based on the cost of contract reviews and IR35 insurances often taken out, this could save contractors an estimated £300-£600 a year, if (and it’s a big if) they continue to remain the status they are perceived to be currently.

Of course, if the tools proves to be too restrictive it may see many contractors moving back into employed positions. Within the public sector we may see this happening quite a lot. However, arguably, with the rising trend in the flexible workforce being led by clients’ requirements to keep costs down and choose when they bring in additional support, it’s likely that relationships will simply change to support the questions the tool poses and therefore those that are currently operating in grey area as to whether they are a disguised employee or not will simply be able to manage the relationship to ensure they are operating as a true business.

It’s still early days, and contractors have been ‘burned’ in the past, but looking from an optimistic stand point, this could massively simplify and protect contractor’s decisions as to how they choose to operate.