Does reverting back outside IR35 pose a risk?

Q. Similar to many other contractors (from what I’ve read), I was placed inside IR35 by my client last month, as they prepared for the arrival of IR35 reform on 6th April. However, because the changes have now been rightly delayed due to Coronavirus, my understanding is that my client’s status determination is void. Firstly, is this correct? Secondly, am I able to transfer back outside IR35 having been placed inside the legislation? 

A. You’re spot on – the IR35 assessment made by your client doesn’t have any legal standing, given that medium and large private sector companies will not become responsible for administering the off-payroll rules until 6th April 2021, after reform was postponed by a year.

This means you are well within your rights to dismiss the determination made by your client if you don’t agree that your contract belongs inside IR35 – for the thousands of contractors blanket-placed inside the legislation, this is likely to be the case.

However, it should be stressed that before you decide you belong outside IR35, you should consider having your contract reviewed, along with your working practices. While plenty of contractors placed inside the rules recently have been subject to risk-averse and inaccurate status decisions, some private sector firms have taken a measured approach to reform and made well-informed IR35 assessments. In other words, not all inside IR35 determinations are wrong. 

The next point to take into consideration is whether your client will reengage you again outside IR35 after having already placed you inside the rules. In fairness, a number of high-profile companies did reverse blanket decisions soon after the delay was announced, but other firms may choose to keep in place their policy not to engage contractors outside IR35, irrespective of the fact that changes have been pushed back by 12 months. 

By this, we mean contractors mustn’t assume they can immediately revert back to outside IR35 working (even after an IR35 contract review) and that the same client will happily engage them until the changes draw near. It’s therefore important that contractors discuss this with their client and, when involved, the recruitment agency, that will also have a view on the matter. 

However, in our view, the delay to the changes does give those risk-averse companies – many of whom were originally banning contractors altogether or insisting they all work inside IR35 – the opportunity to stand back, rethink and engage legitimate contractors outside IR35 going forward. 

This answer was provided by IR35 specialist, Qdos Contractor.