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The IR35 Conundrum

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Emily Ward-Masters

Hi, I'm Emily, the Head of Compliance at JCW Resourcing. I have nearly 10 years’ experience working in compliance within the recruitment sector but prior to around 18 months ago, I didn't pay much attention to IR35. I didn't really have to. And if I didn't care, then no one did.

The 'glory days' of leaving the liability for IR35 in the capable hands of the contractor themselves are over come April 2020. The liability supposedly now falls to the end hirer but in reality it's often the recruiter who will handle it (read: it fell into my lap). Complaints aside, I have now read enough IR35 material and drawn enough flow charts (of ever-increasing complexity) to be able to say IR35 would be my new Mastermind subject.

But I do find the topic quite fascinating! There is certainly a conflict of morals between my 'compliance' brain that loves to see regulations enforced and my 'commercial' brain (that developed unchecked from years sat in the middle of sales teams), which wants to find the path of least resistance to get our client's requirements filled. Ultimately though, I gladly pay all the tax I legally have to, as does the rest of the employed workforce, and no one can really argue with the core of reversing years of historic misapplication of IR35. Debatable as to whether to the means justify the end but none the less, it is what it is.

So, what is the practical solution to maintaining ease of business whilst keeping the contingent workforce mobile and avoiding unnecessary tax burdens for the true freelancers out there. Let me just consult my flow charts.

The Elusive Statement of Work

Let us get this one out of the way early doors. Yes, you can use a Statement of Work to bring contractors outside IR35 if you actually are doing a statement of work. Like many of the great minds in recruitment I sat in front of the blinking cursor on our standard terms, deleted the header 'Subcontractor Agreement' and replaced it with 'Statement of Work', whacked in some deliverables that conveniently took a month each and cost the exact same as 22 days of daily charge. Then thought, wise up, we're better than this.

So whilst the elements of a Statement of Work do 'fit' the outside IR35 model, to force it into what is very clearly a time and materials engagement is utterly pointless if the candidate is having timesheets signed off by their 'manager' for the 40 hours a week he spends devoted to a business as usual process. Payment based on falsified deliverables isn't going to make HMRC close the book and move on. So, I reframed my mindset and moved onto bigger and better ideas.

Getting Practical

I started to question, what actually is my purpose here, am I trying to cheat IR35? No! That’s really not anyone’s intention, I just want to find an ease of business. So then I, obviously, had to make a 17th flow chart and start re-mapping our usual business practise.

Getting Down to Business

So, what did JCW need to do? It was time for me to get creative (not usually my strong suit). I wouldn't want to give away all my trade secrets here but among a number of endeavours we've been working on are payroll verification tests, an internal payroll function and a consulting bench. Stepping back and conducting a final review last week I was surprisingly pleased and if the successful meetings I've had this week are anything to go by, our clients are happy too. The loopholes are closed. Did JCW manage to 'solve' the IR35 conundrum? Not exactly, but by blocking out the noise and engaging in a bit of 'blue sky thinking' (sorry I really couldn't think of a more appropriate phrase!) we've come pretty close.

Was it really that simple?

Putting aside all the confusion and panicking, the answer is...yes! Contingent workers are still a necessity and freelancing is still a legal form of engagement so we're just making sense of a complicated bit of legislation and making sure our supply is maintained compliantly. There is no escaping that a lot of freelancers will be inside IR35 so our test will highlight them, and we'll deduct tax. But for those truly outside IR35, again our test will highlight them, and we will continue as we were before (this time with a bit of extra insurance to protect us and our clients). But we've got enough savvy solutions nailed down that each recruitment process will have its own resolution beyond just putting everyone on a payroll. Simple right?

Can JCW help you too?

If you want to find out more (or just see one of my revolutionary flow charts) send me an email and let’s talk: emily.ward-masters@jcwresourcing.com.