One pivotal piece of information I need from clients when discussing contract roles is if they see the role as sitting inside or outside of IR35.
Outside of IR35, I know almost double the number of contractors will be interested as opposed to if the role sits inside of IR35.
Working outside of IR35, and being paid into your LTD company can make being a contractor much more lucrative. When changes came into force for contractors working outside of IR35 in April 2017 they turned the contracting world upside down.
While the contract market (especially within Town Planning) seemed to an extent, to bounce back reasonably quickly, a number of questions have been asked about how COVID will affect the IR35 legislation.
As we have all seen recently, especially in Local Authorities, COVID has opened the door to home working. Planning Departments that previously deemed it necessary for both permanent employees and contractors to be in the office five days a week have now been forced to offer remote working as a long-term way of working.
How does working flexibility affect IR35?
But how does this flexibility affect the IR35 status of roles? ‘Certainly, the place of work is positive if it can be shown that the individual has the freedom to move between homework – this is useful as part of the bigger picture when trying to demonstrate that the contractor is not under too much control’ is the view of Richard Allen from Champion Contractors.
Work can now be deemed as unsupervised – meaning the contractor is more likely to be seen as working as an external Consultant – potentially meaning more contract roles can be deemed as outside of IR35?
A number of contractors who would previously have used Council equipment within the office, such as laptops and printers, are now doing the same job from home using their own equipment. While Local Authorities have managed to provide IT equipment to the majority of their employees where needed, there are still shortages.
Where they are shortages, contractors are usually the most likely to have to make do with their own equipment. Many are spending money on things like a second screen in order to complete the contract, which could again play a part in deeming more roles outside of IR35.
However, while, as I previously mentioned, contractors do have much more flexibility with the way they work, so do permanent employees at Local Authorities. Whereas before, contractors potentially had slightly more flexibility over permanent staff, they are now on an even footing. Phil Skill has pointed out that ‘I have not met any of my colleagues in person, and doubt I ever will.’
Before clients could deem contractors as external consultants who should be working outside IR35, however, due to this increased freedom with regard to home working, they now have the same working practises as permanent employees.
Richard Allen from Champion Contractors agrees with this, pointing out that ‘You only have to follow the news to see that many companies are considering this as the new “norm” moving forward. Many full-time workers contemplate a career based at home, and indeed many are embracing the idea. The fact that many contractors will also be following the same work pattern does not do enough to move a contractor from inside to the outside of the IR35 legislation.’
More freedom doesn’t mean less work
For contractors who work in Local Planning Departments, while they do have more freedom with the hours they work than before, they still cannot decide their own hours. Most Planners need to be on hand and contactable during the Authorities' core hours, meaning they still do not decide their own hours.
Although COVID has massively changed the way the majority of us work, as well as the contract market, I am skeptical about it having a noticeable effect on IR35 within the public sector. While working practices have changed, they have changed for everyone, not just for contractors, meaning that contractors within Local Authorities have working practices that are more aligned with permanent employees than they were before.
Champion contractors Richard Allen comments that ‘IR35 looks at numerous elements of how a contractor is engaged with an end client from both a contract and working practices perspective. As such a thorough overview of the contractor’s role needs to be considered. Historically, IR35 determinations have always rested on the overall picture rather than just one piece of the puzzle, this is still the case in our current COVID led working lives.’
COVID has also brought an enormous sense of instability to everyone’s lives. Contractors, whether they worked outside or inside IR35, are considering permanent roles for the increased stability after the chaos that COVID caused. Phillip agreed, mentioning that ‘payment from my new contract has been complicated by Covid.’. Which is only one of the many complications contractors faced during the lockdown and might still face moving forward.
Whilst the changes on the way were and still stay massive, I think the way contractors and Local Authorities interact with IR35 will still be similar to how it was before. Only time will tell if Covid will have any effect on IR35.