PSCs concerns: loss of 30% earnings with IR35 changes

Feb 1, 2021

Getting IR35 wrong can be costly. Both contractors and fee payers are at risk of losing out without paying careful attention to IR35 assessments. With contractors at risk of losing between 20-30% of their income if their status changes it is no wonder some may be nervous about who makes the status determination. 

Making it the responsibility of the client to now make an assessment on whether a Personal Service Company is deemed inside or outside of IR35 has the potential to cause these contractors to feel they have lost control of their personal earnings. This is not entirely true. There are some clear actions you can take to be involved in the process, alongside having the opportunity to challenge the final decision. This shift in liability will help to discover disguised employees, and classify them with the correct determination.  

The majority of contractors had hoped the initial delay in the changes to IR35 could help ease their concern over their clients understanding and ability to correctly assess their IR35 status. Giving them more time to get to grips with the legislation and view each PSC within the extended timeframe. However, 63% of contractors surveyed would rate their current client’s knowledge on IR35 negatively. Being a part of the process can make it easier for everyone involved. 

What you should be doing now 

Educating yourself on the IR35 changes is the first key step in order to understand what to look for in new roles and how you can challenge a status determination that you disagree with. Communication is always a vital part of any process, so if you’re in a contract that will continue beyond April 2021 then discussions with your hiring manager and agency can help you establish what actions have been taken to prepare.  

While a vast majority of the responsibility now lies with fee payer, there are actions you can take to be involved in the process in order to get a fair assessment. You can evaluate whether these three main points that determine IR35 are within your contract as well as the actions you take within the role. Ensuring that the performance in the role is reflective of the contract will reinforce your status and allow you to work in the clear definition of either outside or inside IR35. 

  • Substitution  

Being able to send a substitute to complete the work on your behalf. 

  • Direction 

Being directed on how to complete the work by the client, using instructions, guidance, and advice. 

  • Control 

Someone is dictating what work you do and how, including the power to move you to different tasks. 

There also should not be a mutuality of agreement, meaning that both stating within the contract and being carried out in the position, the client has no obligation to offer you more work as well as an absence of obligation for you to take it can indicate the contract is more likely outside IR35.  

Working with a proactive agency that advises their clients on how they can assist your process of determining an appropriate status. At Highfield, we have many years of knowledge regarding IR35 and have spent time understanding the changes, so contact us via [email protected] or phone a consultant on 01489 774010.  

Anyone within the process can make an assessment such as the client, contractor, or the fee payer (like a recruitment agency). Statement determinations from all three will make for a far more robust outcome, creating consistency and certainty through multiple matching decisions and making it even more important to have clear understanding on these changes from all involved. Clients are required to provide a Status Determination Statement (SDS) which is used to: 

  • Declare a contractor’s deemed employment status following an IR35 assessment 
  • Provide the reasoning behind the conclusion. 

This SDS allows you to see how the determination was reached in a fully detailed way, giving you the opportunity to challenge a decision if there are specific factors that can be disagreed with. Alongside this, it helps to prevent companies from enforcing blanket determinations due to requiring justifications for individual workers through the SDS.  

So, take action in your own earnings and utilise the options and people available to get your contract recognised with an appropriate status determination. Speak to our experts and avoid risking losing 30% of your take home pay. 

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