IR35 preparation: A timeline
I’ve talked and written a lot about IR35 in recent months. One common theme from those conversations is that when you get into the detail of a conversation, end clients realise that the timing they had in mind doesn’t quite work.
The new rules come into effect in April 2020. That’s six months away – plenty of time to prepare, wouldn’t you think? Well, yes, it is plenty of time – as long as you’re starting now. The legislation applies to all payments made after April 6th 2020.
Let’s look at an example of why this needs to be addressed now. Say, for example, you undertake work in the week commencing 10th February, the charges are approved the week commencing 17th February, an invoice is raised, and payment within 30 days puts the payment around the last week of March. Any delay in approval or payment could render those payments subject to the new rules.
It’s prudent, therefore, to set a deadline at the beginning of February for engagements to have been reviewed, contracts in place that cover the new legislation and any status change to be in place. Contractors with longer payment terms will want to be confident of their contractual position before this point.
What needs to happen before February?
Clients will need to initially identify all of the off-payroll workers. This initially may sound straightforward, but in reality, for many clients it is not. The first sticking point is that many clients confuse this process with the actual IR35 status assessment. This is just about determining how many people supply services via an intermediary they own 5% or more of, for which they receive payment for (that is the simple version).
This often includes more than initially expected, and can require speaking to suppliers and asking some questions about the supply type. Once completed, you need to start the assessment process. This will involve looking at the current working arrangements and deciding what future working arrangements will work for all parties, as well as reviewing contracts.
We would advise undertaking a two-stage review process to give an opportunity to identify those roles that may be suitable for a revision in working or contractual arrangements, before a full formal assessment takes place.
If you complete the identification, initial review and grading of engagements, as well as communicating with those workers by December, then you’ve got two months left. In this time, you will need to put new contracts in place, negotiate rate changes and back-fill any project roles where there is misalignment on the working arrangements.
A good approach will mean you’re able to start communicating with contractors before the end of the year. Ideally, your first communications should be going out in September or October 2019.