Aberdeen-based consultancy Hunter Adams recently convened 40 senior HR leaders from the oil and gas sector to debate the practicalities around the implementation of the IR35 reforms, due on April 6, 2020.
Hunter Adams Founder, Dean Hunter has worked with IR35 since 2000, and with the reforms in the public sector since 2017.
He said: “There is no magic wand to deal with these changes. We need to explore every avenue and be prepared to answer the questions and challenges that our businesses are likely to throw at us.
“This is tax legislation – we have a part to play in the process but we must have the right people around the management table involved in these decisions.”
Many companies are in the very early stages of the planning process. This is largely due to the fear of further changes from HMRC. It is also linked to the lack of faith in HMRC’s revised CEST (assessment) tool.
The bill is yet to be passed to bring the reforms into effect – this is now expected to happen in the March budget following the cancellation of the budget in November.
The Government’s current review of the regulations is focused more around implementation than the actual reforms themselves; so as a multi-billion pound revenue generator, it looks as though these reforms are here to stay, hence why preparation is essential.
The government has allegedly stated that they are not looking to ‘punish’ companies in the first 12 months post implementation. They will, however, have a lack of tolerance towards purposeful avoidance of the reforms.
Dean continued: “We are seeing from the assessments that are being completed that we really have three categories of people. A ‘red’ group, which will always be considered in scope of the regulations and cannot legitimately consider themselves genuinely self-employed; an ‘amber group’, who are in scope of IR35 due to working practices and the inability for companies to engage workers as was always intended; and a ‘green’ group – the genuine contractors who are ad-hoc self-employed workers.
“Whether companies wish to transfer the ‘amber’ group to ‘green’ and out of IR35 scope, will depend on the company’s willingness to engage the workers as HMRC intends. This will require a change in mind set from business leaders.”
Dean added: “We need to be creative and flexible in our future employment vehicles if we are to effectively transfer workers to employee status. Most want a cash-based package so tools such as ‘flexible benefits’ and PAYE day rates may be more attractive to those who have operated on a cash basis for years.
“Companies need to ensure they abide by the rules of the game relating to statutory benefits that must be given or at least offered. Pension auto enrolment being an obvious one.”