‘Lip-service’ IR35 review must not stop Oil & Gas companies getting ready for reform
In early January, the Government launched its review into the Off-payroll tax reforms, which will be introduced on 6th April and see medium and large private sector firms handed the responsibility of deciding the tax status of the contract workers they engage.
The review - which the Government announced will be held to ensure the “smooth implementation” of controversial changes to the IR35 legislation - will be open until mid-February. However, because the review won’t consult on whether reform is necessary and will instead focus on how the changes will be rolled out, it has been heavily criticised - and rightly so.
The concern among IR35 specialists, including Qdos, is that the Government is simply paying lip-service to contractors and the private sector by holding this review. Bear in mind there was no mention of a review in the Conservative Party manifesto and the Chancellor promised it just before the General Election - perhaps only in reaction to the Liberal Democrats and the SNP both receiving praise for addressing the issue in their manifestos.
With this in mind, our advice to Oil and Gas firms and recruitment agencies placing contractors in this sector is to prepare. The introduction of the Off-payroll changes already seemed very likely. It now seems somewhat of a certainty.
To continue enjoying the cost benefits of compliantly engaging contractors outside the scope of the IR35 legislation - which is in place to determine whether an engagement reflects employment or self-employment - Oil and Gas companies need to be in a position to assess IR35 status accurately.
But how to do this? Firstly, work off the basis that reform will be enforced and prepare immediately. Assess the impact changes will have on your business. Discuss these changes with the contractors you engage or place. Consider IR35 insurance. Do not rely on HMRC’s IR35 tool, CEST, even if it is to be examined yet again in the review. The tool is lightweight compared to an independent IR35 status review and has been dismissed in court.
HMRC has arguably left it too little too late, with a last-minute IR35 review. Even if there are tweaks made to the final IR35 legislation - which is yet to be published - reform is rapidly approaching.
However, that’s not to say these changes can’t be managed. Oil and Gas companies, that rely on the flexibility and specialist skills of contract workers, will be able to continue engaging independent professionals safely outside IR35 after April and, importantly, minimise the IR35 risk the fee-paying party in the supply chain will carry.
Qdos is helping more than 100 private sector firms manage IR35 reform. We have extensive knowledge in the UK’s Oil & Gas sector and conduct independent IR35 status reviews supported by IR35 insurance.