Part of the work we do here at Agile Recruit is Resource as a Service (RaaS), so we offer companies a one-stop solution for hiring IT contractors. We have been doing this for many years now, and so of course we have recently been involved in many discussions around IR35.
One of the questions we get asked most often here at Agile Recruit is “what is your approach to IR35?”
What is IR35?
IR35 is a set of tax laws that first came into effect in April 2000 and latterly became part of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA). It’s intention was to address tax avoidance by individuals via an intermediary, such as a personal service companies (limited company).
Despite being more than 20 years old the legislation has been criticised since its inception and led to the new Off-payroll legislation, initially introduced into the public sector in April 2017, and extended to the private sector in April 2021. The Off-Payroll rules shifted the onus for assessing IR35 and the tax liability away from the end contractor to the client and other parties in the supply chain.
Deciding whether a contract is inside or outside of IR35 can be a complex task, and this had led to organisations and some sectors taking blanket approaches, in some instances refusing to work with independent specialists altogether. Our view is that this is extremely short-sighted and simply does not need to be the case. Agile Recruit can help make this a simple and straightforward process, with fair decision making, and when outside IR35 determinations are made, these decisions are backed by insurance.
How do Agile Recruit deal with the client?
The first thing we do when taking on a client who is looking for IT contractors to help them with a project is to talk to the client and get a good understanding of the work to be done. We’re looking to hear what is to be completed and how so that we have a clear idea of whether it is suitable to be delivered by one of our Specialist Suppliers and the methods of delivery that could be used. We’ll discuss the merits of various approaches and it’s important to note we have no preordained agenda here. From this point, we should be able to give guidance on whether is likely to be suitable to be delivered inside or outside IR35.
In the event, we feel the work is likely to be suitable to be delivered “outside IR35” we move on to a formal assessment. We have found that HMRC’s Check Employment Status for Tax tool (CEST) is biased towards bringing an ‘inside IR35’ decision, so we use a more thorough and balanced independent tool instead.
This begins with the client completing a “Role Status Determination Statement” Report which consists of 12 questions, such as:
- Will you expect the contractor to use their own autonomy in how they perform the services?
- Will you expect the contractor to rectify any sub-standard work in their own time and at their own cost?
- Will you offer the contractor employment-related perks and benefits as you do for an employee?
Once this report has been completed, it is then assessed as to whether the contract would fall inside or outside of IR35.
The next step is to talk to the relevant contractor.
How does Agile Recruit deal with the contractor?
Once an IT contractor who could complete the work has been identified, we then send them a “Status Determination Report” questionnaire which features 42 questions. This gives us a more in-depth look at how they run their business. Some of the questions asked include:
- Has your company / will your company undertake any separate contracts concurrent with this engagement?
- Is there / will there be a specific end date to this contract?
- Could you engage helpers on behalf of your business to assist in providing the services?
Once this report has been completed, it is then assessed again – and the information from this is put together with the client’s report and a Status Determination Statement is created. This is then sent to the client for agreement, and a copy is then sent to the contractor as well.
Something that makes Agile Recruit stand out from the crowd when it comes to IR35 and IT contractors, is that we also have an insurance provider in place that covers both Agile Recruit and ALL parties in the chain up to £100,000.
Our goal is not to steer people towards outside or an inside IR35 decision, but to help clients package up the work in a way that can take advantage of the merits of either approach.
We can help guide clients and IT contractors through the whole IR35 process – you don’t need to be an IR35 expert.