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How Has IR35 Effected Contractors?

Following on from ‘How Working in Digital Health Has Changed’ that focused on some of the changes to working habits to contractors within Digital Healthcare, I wanted to share some more thoughts on how the landscape has differed for contractors. This time around, I will focus on how the pandemic has in fact helped to deliver contracts ‘outside’ the scope of the Off Payroll Working rules or IR35. 

What does inside IR35 mean? IR35 is shorthand for 2 sets of Tax Legislations designed to identify contractors and businesses who are avoiding paying the appropriate tax by working as 'disguised' employees or are engaging workers on a self-employed basis to 'disguise' their true employment status. 

The IR35 legislation was formed in 2000 but after much criticism was reformed in the public sector in 2017. The reform brought in the ‘off payroll’ working rules, and with it, a lot of change for the contracting landscape. The status determination became the decision of the Client and a new HMRC Cest (check employment status for tax) tool was created to determine whether or not an engagement sits inside or outside the scope of IR35. From this, a ‘self-employed’ or ‘employed’ status can be established.

Up until the beginning of the pandemic, questions about contracting were always met with the same answers. Ultimately, these were to ensure roles were captured Inside of IR35.

These were questions such as:

 

  • Does the organisation have the right to decide where the worker does the work?

  • Does the organisation have the right to decide the workers hours?

  • Does this contract stop the worker from doing similar work for other organisations?

  • Will this work take up the majority of the worker’s available working time?

What I’ve found over the past few years, questions such as the above answered in a completely different way. Alongside the move towards remote working, the market has seen and often given the verdict that more roles are now being considered for outside the scope of IR35.

Currently, many contractors are working independently in their own environments and not restricted to working within certain hours of the day. With this, there have been a greater number of opportunities for contractors to work ‘outside’ IR35.  

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