What does IR35 mean for the private sector?

6th August 2019

 

Lately, a lot of contractors have been asking what does IR35 mean for the private sector? IR35 is not new, it was implemented as a measure to separate independent self-employed contractors with employee-like one client dependent consultants. The key to determine whether a contractor should be classified as within or outside of IR35 is independency and the right to complete work with a substitute. The new regulation of IR35 is to shift the responsibility of judging whether a contractor is within or outside of IR35 from the contractors themselves, to the agencies and the ultimate employers.

 

IR35 was rolled out in the public sector in April 2017. From NHS’s initial approach of disengaging all limited company contractors, to contractors leaving the public sector for the private sector, to the public sector raising contract rates and cutting agency fees in order to attract contractors back, it has been an interesting journey indeed. So what is going to happen now that the new regulation of IR35 is to be rolled into the private sector? We think one thing for sure, contracting and independent consultancy is a trend to stay regardless of the tax benefit. A report released by Mckinsey, Independent Work: Choice, Necessity, and the Gig Economy concluded that 75% of independent work force choose independent work out of preference. There is no doubt that a lot of contractors choose this work arrangement to enjoy the independency, variety of assignments and the control in their own work life balance. Therefore, the diminishing tax benefit for being a contractor shall not lead to detrimental effect to the entire contracting industry in the medium, long run.

 

On the demand side, companies use contractors to fulfil their short-term staffing needs. With the rising regulatory projects within the professional contracting industries such as the Brexit programme, the need to hire short term interim staff is to stay.

 

What do we expect to see in this coming April 2020:

 

1) The Rise of PAYE umbrella company contractors versus limited company

 

Agencies and companies will take extra care and are likely to guide contractors into PAYE umbrella company arrangement from April 2020 onwards. It is therefore extremely important to choose the right umbrella company that is compliant with the IR35 regulation. In preparation to the upcoming change in the market, iContract has partnered with fully complaint umbrella company to provide contractors with the level of advice and service they deserve. So as contractors, you can prepare and get the right infrastructure in place ahead of the change, with exclusive package and benefit made just for iContract users.

 

2) Project based supply from management consultancy firms

 

Small, medium management consultancy companies is the new source for contract work. We think it is highly likely that large corporates will use management consultancy companies for project work, to reduce the risk of making any judgement on whether a contractor is within or outside of IR35. You can join our iContract premium consultancy arm to bid for projects and share profits.

 

– Do you have projects in hand but need a team and infrastructure? Bring the project to us and iContract will find the right consultants to work on it and share up to 20% of the profit back to you;

 

– Are you a solo contractor and looking for a partner to support you to build your own team of consultants? Join our Joint Venture Partnership programme to set up your own consultancy arm leveraging our contractor network and infrastructure.

 


 

iContract is an online platform to connect professional contractors with employers and recruiters for job matching and networking. They offer Contractors an online portal to build live profile, search for quality contracts and to connect you with employers and recruiters, as well as services to support Contractors in their everyday needs from umbrella, accountancy services to consultancy partnership. Join today at www.icontract.co.uk.

 

All content is accurate at the time of publication

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