Are Status Detetmination Statements Still Valid?

by | Jun 18, 2020 | Blog, Corporate Blog, IR35 & Off-Payroll

Do Status Determination Statements Issued to Contractors in Preparation for the IR35 Reforms Still Apply?

Now that the reforms have been put back as a result of Coronavirus, many end hirers, agencies, and contractors are questioning the validity of their Status Determination Statements which were issued in preparation for the original deadline (April 6th).

Technically, the SDS can have no weight in law because the legislation to which it applies (the Finance Act) has not yet come into force, and will not do so until April 2021.
 
In effect, continuing to use a PSC contractor who had been issued with an ‘inside IR35’ SDS carries no financial liability for the end hirer or agency. Contractors remain responsible for their own IR35 compliance until April next year (2021). End hirers do not need to take action in response to any SDSs they have issued at the beginning of the year ie. move ‘inside IR35’ contractors to an alternative payment option (PEO or Umbrella).
 
“However, it would be imprudent for either end hirers, agencies or contractors to discount SDSs because the criteria for IR35 assessment against which they were made is still applicable. Contractors who were issued with ‘inside IR35’ SDSs will still need to make sure they are working compliantly, especially if working through their own limited company/PSC.” Chris James, Director of Accountancy Services, JSA and Chairman of the FCSA.
 
How can end hirers and contractors use the SDS outcomes to inform their preparations for next year?
 

End hirers

 
While it’s now less urgent to act upon the outcome of your status assessments, it is important not to ignore previous IR35 status determinations. If a contractor has been issued with an ‘inside IR35’ result, acting ‘outside IR35’ until changes are officially implemented in 2021 may not be a problem of liability for the agency or end hirer, but could have an impact on you reputationally.
 
However, the postponement of the upcoming reforms means time is now on your side and you are now able to:
  • Discuss compliance with PSC contractors whose SDS showed they were ‘inside IR35’ – it’s in everyone’s interests that compliance rules are adhered to.
  • Properly review what proportion of your contractor workforce would be ‘inside IR35’ in 2021, conducting individual assessments where necessary to ensure that any assessments made previously are correct and rescinding blanket bans where applicable.
  • Alter working arrangements so that PSC contractors can be retained compliantly, where appropriate.
  • Decide how you wish to work with ‘inside IR35’ contractors ie. take them onto your payroll, use an outsourced employment (PEO) solution, or request that they work via an Umbrella partner.
  • Determine when and how you will transition these contractors, and who you can partner with to make sure this is a success.
  • Assess any budgetary impact ie. whether you need to increase the gross rate of pay to affected contractors in order to retain skills (as they will have more tax to pay).
  • Review whether you have the correct status assessment procedures in place to issue accurate SDSs. If your assessment tool does not provide insurable results with guaranteed compliance, consider switching to one that does.

Contractors

Contractors who operate via their own PSC who were previously issued with an ‘inside IR35’ SDS should take heed. This is a warning sign that you may not be operating compliantly and you will remain liable for any underpaid tax up until April 2021.
 
But, you’ll now have time to:
  • Talk to your end hirer if you disagree with their previous assessment and potentially appeal your SDS result.
  • Review your working practices to bring them into line with the compliance rules for operating ‘outside IR35’ if you want to continue to work via your PSC.
  • Work with your end hirer or agency to review alternative options. These could include becoming an employee of your end hirer, going onto the PAYE payroll of your end hirer or employment agency, or switching to an Umbrella company. You will need to look at the financial implications of each option, we can provide you with detailed pay illustrations to help you decide.
  • Understand more thoroughly the IR35 assessment process so that you can work compliantly and enjoy the benefits of being a contractor without having to worry about HMRC.

 

How can we help?

 
We are here to help contractors, agencies, and end hirers to comply with IR35 rules and prepare for the introduction of the reforms next year. IR35 Complete from JSA comprises our full suite of solutions.
 
There are three main components:
 
1. Tailored advice and guidance
Our IR35 experts will help you understand and prepare for the reforms. We have worked with the legislation since it was first drafted and supported clients in the public sector when similar reforms were made in 2017, so we are well placed to help you navigate the rules. If you’re a contractor, please get in touch via phone or email or complete this form. If you’re an agency, please contact a member of our Business Development Team.
 
2. Instant IR35 Assessments with insurable outcomes
Our proven IR35 assessment tool involves a simple questioning process to ascertain an accurate IR35 status quickly and easily. It can also be used to review the status of new roles or assignments which are subject to change. Agencies and end hirers can use the tool to analyse their workforce over the coming months, identifying those inside and outside IR35 (and the reasons for these conclusions), to help assess the impact of the IR35 reforms.
 
Some of the main benefits of our assessment tool include:
  • Provides a firm judgment in borderline cases, with results that can be insured for complete peace of mind.
  • Easy to complete assessments that provide instant Status Determination Statements (SDS).
  • Complete transparency and control throughout the supply chain, from end hirer to payment solution.
  • Can be white-labelled for agency use with end clients.
  • Provides feedback on the reasons for a determination, so that if possible, changes can be made before April 2021.
  • Meets HMRC’s requirements for valid SDS.

 

Please get in touch for more information.

 

3. Range of payment solutions
IR35 Complete includes access to our full range of employment options for both ‘inside’ and ‘outside’ IR35 contractors. ‘Outside IR35’ contractors can utilise our PSC accountancy service whilst ‘inside IR35’ contractors can work via our leading Umbrella service. For those seeking an alternative to Umbrella, we offer an outsourced employment (PEO) solution, providing payroll services to agencies so that you can operate a transparent method of paying your workers without contractors incurring a fee.
 
For more information on the new legislation, or any aspect of our services, please get in touch.

JSA Group

Specialist outsourced accountancy and payroll services for recruitment agencies, freelancers, contractors and umbrella workers. We’ve built up expert knowledge and experience within the industry by supporting tens of thousands of customers for 30 years.

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