IT contractors are showing an “increased reluctance” to work for private sector organizations that have a reputation for taking a slapdash approach to complying with the incoming IR35 reforms, it is claimed. In anticipation of the reforms coming into play in the private sector from 6 April 2021, companies have been rushing to ready their operations to ensure the engagements they have in place with their contractors are compliant with the reworked rules.
Under their terms, all medium-to-large private sector companies will assume responsibility for assessing how the contractors they engage with should be taxed, whereas – presently – this is something contractors are allowed to determine for themselves. The shift in responsibility is part of a long-running tax avoidance enforcement clampdown by HM Revenue and Customs (HMRC) designed to discourage contractors from deliberately misclassifying their end client engagements to minimize their employment tax liabilities.
The tax status determinations are based on the work the contractor does and how it is performed, and – from 6 April 2021 – the end client will need to decide if the contractors they engage with should be taxed in the same way as employees (inside IR35) or as off-payroll workers (outside IR35).
As reported by Computer Weekly, many private sector firms have sought to reduce the administrative burden associated with taking the time to individually assess each engagement they have in place by issuing blanket determinations whereby all of their contractors are ruled to be working inside IR35.