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What does draft IR35 legislation tell us about upcoming reforms?

Thursday 22nd August 2019

Sterling - What does draft IR35 legislation tell us about upcoming reforms?

As the date for IR35 reforms draws ever-closer, the government has recently published draft legislation as part of the Finance Bill 2020, to provide businesses with a clearer picture of what changes they will need to implement to ensure compliance.

These changes will see the responsibility for determining the IR35 status of a contractor, move from the contractor themselves to private sector clients. This, however, will only apply to medium and large businesses, contractors working with small businesses will continue to identify their own IR35 status.

With many issues arising from these same changes to the public sector, the government held a consultation to identify areas for improvement, to make the implementation of these new changes a much smoother process.

Below we take a look at new points within IR35 that the draft legislation has outlined:

New IR35 features outlined

Status determination statements

At the conclusion of any assessment made by a client on the status of a contractor, they must subsequently submit a ‘status determination statement’ to the contractor via the fee-payer. Whilst this presents significantly more administration time for an agency, it will also greatly reduce (if not eliminate) blanket assessments, which caused substantial issues following public sector changes.

Disagreement process

For contractors that disagree with a decision made by a client, they will now have to abide by a client-led disagreement process. This means that clients will have 45 days to reply to a contractor’s disagreement and submit a comprehensive response as to the reasoning behind their decision.

However, many experts have raised serious concerns that the government has failed to address the issues raised in the consultation, namely the request for an independent appeals process. Instead, many experts worry that a client-led process will be biased in favour of the client rather than it being resolved by an impartial third-party.

What this draft legislation ultimately tells us, is that agencies have a great deal of work ahead of them in order to adequately prepare for these reforms.

Are you struggling to understand IR35 and the impact it will have on your agency? Contact the Sterling team today to arrange a workshop with our experts.

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