Wednesday 5 February 2020 12:16 pm

The clock is ticking: Why it's time to address IR35

Kevin Corne is the Chief Operating Officer at business transformation consultancy, Sullivan & Stanley.
Chief Operating Officer, Sullivan & Stanley

There has been a lot of noise around IR35, the updated government intermediaries legislation. Generally, it seems to be leaving a bad taste in people’s mouths. And that’s the trouble with some taxation changes: their interpretation and intent can be tarnished with a negative brush. 

Instead of fuelling the current conversation, is it time to turn this on its head and look at the opportunities IR35 can genuinely present?

To achieve this, we decided to get to the root of the subject by uncovering how the wider business community feels about IR35.

After speaking to 500 decision-makers, we were shocked to learn that 71 per cent were unaware of the date that it comes into effect (April 6, 2020). 

More than half also told us that they haven’t received enough information, while 52 per cent claimed it is contradictory or confusing. 

So, what is IR35?

To put it simply, IR35 is tax legislation that was enforced in 2000 by HMRC to collect correct tax payments where a contractor is an employee in all but name. What is changing in April is the determination and liability for payment shifting to client and fee payer, away from the contractor.

Although being simple(ish) to define, IR35 is still a complex process to implement. In response, businesses seem to be taking two approaches — a blanket solution (with 33 per cent considering converting contractors into full-time employees) or shying away from addressing the issue (three quarters run the risk of not being ready on time). Neither will help an organisation achieve the most from this change. 

With 47 per cent hoping IR35 would bring an opportunity to review and improve systems, we decided to uncover some of the positive outcomes that it can present. 

Take a step back

It’s easy to lose sight of why your workforce is shaped as it is, so IR35 is the best excuse to take stock of your current situation and the value it’s delivering. Ask yourself, can you really share that ROI back to the business and demonstrate success on time?

Change your model 

Now is the time to design your operating model so your business has the right talent and resources in place to be fit for the future. In reviewing the existing employment strategy, businesses will be able to identify many areas that can be improved and accelerate results

Bring your customer front of mind 

IR35 is a business issue, but we’re all consumers. If you keep the customer in mind when reviewing and developing your operating model, it leads to longer, more loyal relationships. This, in turn, increases revenue and profit over time. So taking an inside-out approach to building a team that will delight the customer is a win-win for everyone

For contractors, it will allow them to embrace the best aspects of the gig economy; the ability to share their vast experience on multiple projects and the opportunity to earn more as it may spell the end of the day rate. Also, more satisfaction in what they do as they will be measured against deliverable outcomes, rather than a timesheet.

It’s clear that IR35 opens up an abundance of opportunities for businesses and the wider economy in 2020. However, it will take time to find the best and most appropriate approach. With the clock ticking to make these crucial changes, it’s more important than ever to start addressing them now. 

The full report from business transformation consultancy, Sullivan & Stanley, called “Change Is Good: Why IR35 Presents Opportunities for Business and Contractors” is available to read here

Main image credit: Getty