• IR35 Reform – are you ready?

    New rules for IR35 in the private sector

Industry issue:

IR35 Reform – are you ready?

18 March 2020

See BDO's Off-payroll labour tools

The new rules for IR35 in the private sector apply from 6 April 2021 and particularly impact businesses in the oil & gas sector, given the high proportion of contractor arrangements along with the added implications of offshore and cross-border workers. These changes could result in an increase in operating costs and have a significant impact on current operating models. However, they also provide an opportunity to implement revised terms and conditions for engagements where they are no longer fit for purpose.

How will IR35 affect companies?

The changes relate to the engagement of workers through UK Personal Service Companies (PSCs) and other intermediaries.   The new rules require companies to assess if the intermediaries rules (IR35) apply to the contracts they enter into with any PSCs either directly or via third parties. The outcome of the assessment, a Status Determination Statement (SDS), must be provided to each worker and the next party in the supply chain, for example an agency. Where a non-UK PSC or intermediary is engaged, whilst the IR35 legislation will not apply, there may still be tax withholding consequences for the engaging party, for example under the host employer rules.

How can you prepare for IR35?

Putting in place a robust checking mechanism is key for all new off payroll arrangements. In particular:

  • Establish the profile of your use of PSCs and wider non-payroll labour.  This will provide clarity on what commercial contracts are in place and if they remain fit for purpose.

  • Consider introducing updated contracts that meet the needs of the organisation in the event IR35 applies. 

  • Ensure payroll arrangements are implemented where workers are found to be within IR35.

  • Put processes in place to guarantee that an IR35 assessment is completed before engaging with a worker supplied via a PSC.

How we can help you

We can work with you to identify what contracts may be at risk, assess both the potential financial and operational impact on your business and implement changes that will minimise the impact of the new rules. We can also help you build a robust compliance structure for the future.