What is IR35?

IR35 is a UK-specific tax regulation that aims to ensure that contractors who work in a similar way to employees, broadly pay the same employment taxes as those employees. This regulation has been in place since 2000, but a change to the way the rules are enforced is being introduced in  April 2020. This will then mean that companies that utilise the services of contractors through agencies such as Eaglecliff Recruitment will be responsible for an IR35 assessment of the tax status of contractors who come to work for them. This is a change from the current ruling which enables contractors to make this assessment for themselves directly with their Financial Advisors or Accountants.

The way IR36 is enforced will be being changed in April 2020

What Will Change?

Many of the Contractors who provide their Services through Eaglecliff Recruitment will be in-scope for these reforms. Each of the clients that we work with will need to conduct an assessment that says whether the Services provided by each Contractor will fall inside or outside of the IR35 regulations. The outcome of that assessment will be passed directly to Eaglecliff Recruitment, who will then liaise with each contractor individually. If this assessment shows that the work is inside, it’s possible that the contractor will have to change the way they pay their taxes – shifting to a PAYE arrangement – and they may be required to pay some more tax.

HM Revenue & Customs has developed a method for conducting these assessments; this to help end-users of contractors’ services and contractors themselves. If the method is applied correctly, HMRC will honour that assessment. 

Many of the companies that we are working with are also working with leading consultancies in order to ensure that the Tool utilised will be flexible and provide accurate results that can be relied upon.

We are confident that these Assessments will be conducted in early 2020 and new contracts will also be issued in accordance with the results of these assessments as well.

We are receiving a huge number of phone calls regarding potentially changing the End Date of an existing Assignment to the end of March 2020.

However, we are advising contractors not to do this but rather to maintain business continuity as usual and to address any contractual changes independently.

We are confident that these tools will be able to accurately determine the IR35 status of the numerous roles that contractors are providing for the companies that we work with.

If you feel that your role will be determined as being inside of IR35, it is advisable to be taking steps now to look at how this might change your pay structure.

It would be good to liaise with your Financial Advisor so that you have plenty of time to evaluate changes prior to these being implemented next year.

Contractors play an important role and these Services are hugely valued and appreciated, both by the Clients that we work with and by Eaglecliff. 

Shell’s Response to IR35 Changes – What’s been happening since August?

Following our update in August, we’re sharing the latest developments in Shell’s response to IR35 changes. We understand you’re likely facing questions from contractors – we would encourage you to share this update with them.

A Reminder of Our Position

  • Contractors remain a critical part of Shell’s workforce in the UK. This doesn’t change as a result of IR35.
  • Shell must protect its licence to operate and respond to these legislative changes in a fair and responsible way, that is in line with Shell General Business Principles.
  • We will run a transparent and consistent assessment process, guided external advice on best practice.

What progress has been made?

  • Managers* received guidance on IR35 at the beginning of October. Those who have in-scope contractors will receive further guidance in advance of the IR35 assessment process getting underway.
  • We have reminded managers that they cannot offer advice to contractors on their IR35 status, and that they must not support or facilitate attempts to circumvent the IR35 rules. Managers will advise contractors to direct questions to IR35 or their suppliers, or to their accountant or tax advisor.

How are we preparing for assessment?

  • Working with suppliers, we have completed detailed work to identify work undertaken by contractors that requires an IR35 assessment.
  • We have partnered with PwC to develop an IR35 assessment process – and note, it is designed to guarantee an IR35 Status Determination. The process has been tested, and is now ready for deployment.
  • We will begin conducting IR35 assessments in the weeks ahead.

The Assessment Process

  • Managers of in-scope contractors will be asked to respond to a series of questions about the working arrangements in place. They will receive guidance and support on how to conduct the assessment.
  • Best-practice advice tells us that we should only conduct IR35 assessments on work that is currently contracted to expire beyond April 2020. Therefore assessments will progress in phases. We will begin with work undertaken by contractors where the contract expiry date us currently beyond the deadline of April 2020. Subsequent phases of assessment will capture work undertaken by contractors with relevant expiry dates, as contracts are extended.
  • We expect IR35 Status Determination Statements to be released from late-January 2020 onwards.
  • We will share further detail on the appeals process mandated by the legislation when we release Status Determination Statements.

Further Questions

  • As a reminder, we are unable to answer questions from individual contractors on IR35 assessments.

*for the purpose of IR35 communications, manager is used to denote the individual who engages a contractor to perform work in their team.

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