Everyone’s talking about IR35 – how we tax contractors – and the big changes that are coming in April. We’ll see the final legislation in mid-March so that leaves a hair-raisingly short amount of time to prepare before the 6 April deadline. That’s just one of the reasons why we think IR35 must be delayed for a proper review.

Given the situation is as clear as mud, some businesses are being tempted by the idea of making ‘blanket assessments’. They are deciding to put all their contractors into one category, either outside IR35 or inside, meaning they’ll be treated like employees for tax purposes. That’s regardless of the role the contractor is actually doing. Badging all contractors the same might seem like a quick fix, but in reality it only stores up bigger problems for the future.

Making blanket assessments is a big mistake for client businesses and we think it’s bad for contractors too. Here’s why:

• The regulations actually require you to assess contractors on a case-by-case basis. So, if you’re assessing everyone the same without looking at people as individuals, that’s not right.
• This is about contractor relations too. You might find staffing your projects is more difficult. Contractors are rightly concerned about their tax liabilities if you’re just making a blanket decision without considering what they actually do, or have done in the past. For example, contractors who have worked under their own supervision being assessed the same as those who have worked under the direct supervision of the client. It would be understandable for contractors to feel undervalued and at risk.
• Contractors in the private sector will be able to take clients and agencies to court in order to claim back the costs of wrongly working inside IR35. So not looking at contractors individually could have a big financial consequence later on.
• If you’re forcing your contractors to go PAYE, they may go through different routes to achieve that – direct employment or using a so-called umbrella company. That will make your supply chain more complex and compliance more difficult to establish. That’s a big problem given the liabilities firms now face.
• There are regulatory changes that come with moving people to PAYE. For example, you’ll need to think through the Agency Workers Regulations and treating staff equally with your own employees on pay, hours and holidays.

There’s a moral to this story. Just because the government hasn’t thought through IR35 properly doesn’t mean you should follow their example. Just like two wrongs not making a right, a slap dash approach to an already messy and flawed tax reform is only setting us up for trouble.

So our message to clients in the Good Recruitment Collective, the 500 businesses that work with the REC is, generally, don’t go down the route of blanket assessments because in the long-run that’s going to be more problematic than taking the time now to get in right.

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