IR35: The importance of cooperation between the contractor, the agency and the end client

IR35: The importance of cooperation between the contractor, the agency and the end client

There has been considerable debate over the introduction of off-payroll working rules in the public sector, which are also set to apply to the private sector by 2020. The changes place the responsibility for determining whether IR35 applies to a contract with the government organisation that is paying the contractor. This means that although the decision will now sit with the employing government department, the responsibility to deduct NIC and PAYE will be left with agencies, as will the probable liability. It is, therefore, important that agencies are confident about their client’s decision, and that contractors supply their clients with the information that they require.

The fact is that in most cases, independent professionals will know more about IR35 than their end-clients. Accurate IR35 determination takes into account a number of factors from each party in the supply chain, from the end client, to the recruitment agency, to the contractor. Without collaboration and transparency, the accuracy of any decision could be seen as biased. By engaging in open conversations, the three parties can help to ensure accurate and well-informed decisions are being made about the contract status.

For example, it’s now in everyone’s interest to include clauses relating to the contractor’s right of substitution and control when applicable, and to ensure that the upper level contract between the agency and the client mirrors the lower level contract between the agency and the contractor. Developing good business practice will go some way towards combating risk and ensuring supply and demand in the contracting sector remains competitive.

The off-payroll reforms
saw many public sector contractors wrongly classified as employees and forced onto the payroll. The reaction of many contractors was to turn their backs on the public sector for good, leaving organisation such as the NHS with a serious deficit of workers. With both public and private sector organisations increasingly competing to secure access to skilled workers, clients are now anxious not to compromise their services by limiting their access to skilled contractors. In a seller’s market, contractors are more likely to choose to work with agencies and clients who seek to cooperate in the interests of safeguarding everyone’s interests.

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