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This article is the third entry in Qubix's 'Countdown to IR35' blog series running up to the April 2020 deadline (recap on the first entry here). The purpose of this blog is to support our clients that may be affected by the new employment tax changes in the private sector. Providing key updates, insights and solutions as we work together toward the IR35 rule changes so that informed, accurate status decisions are made to protect all parties involved.

Countdown to IR35: post-webcast speaker insights

 

Qubix hosted a webcast earlier this week discussing in-depth the changes to off-payroll working rules. You can watch a recording of this webcast here. This blog will outline some of the key insights and explore, in specific detail, the 'consultancy carve-out'.

First and foremost, we'd like to thank those who attend this week's webcast. We had over 60 registrations that included an audience from both sides of this issue, contractors as well as end-clients. We received great feedback from our subject matter expert Chris James, Chairman of the FCSA and hope to continue working with him running up to April 2020. If we did not get an opportunity to answer your question during the webcast or if you missed the webcast, the fourth entry of this blog will have the transcribed Q&A portion of the webcast - we share this with webcast attendees and non-attendees next week. 
 
Below are some of the key insights shared by Chris James and how Qubix enables the 'consultancy carve-out' to help protect end-clients. 
 
IR35 new rules recap
 
From April 2020, the responsibility for IR35 status determination decisions now moves to the end-client rather than the contractor/personal services company (PSC). The financial risk, therefore shifts from the contractor to the fee-payer (whoever owns the PSC). The fee-payer now becomes liable for any underpayment of tax or national insurance contribution (including the employers' national insurance). Ultimately, agencies and end-clients are taking on a new financial risk. It is essential to note that PAYE and umbrella workers are outside of scope.
 
Implications for contractors and PSCs
 
For a contractor working with a non-small end-user: 
 
  • If the end-user decides the assignment is 'inside' IR35, they will be paid with employment taxes deducted. 
  • If they have that pay paid using their original PSC, then they'll be suffering employment taxes and relevant accountancy fees without receiving any employment rights.
  • For some contractors, if their assignment is 'inside' they'll be tempted to work through a PAYE or umbrella instead.

In the long-run: 

  • If contractors see all their future assignments inside IR35, then it may make sense to close their PSC.
  • They must take individual advice to ensure they don't make mistakes that are bad for taxation purposes.
  • They may well find end users gradually change their approach to what kind of assignments can be inside or outside IR35. 
 
Implications for end-clients 
 
  • If an end-client is prepared to accept a PSC or other intermediary in the supply chain, they must issue a Status Determination Statement (SDS) for each assignment, or they remain liable for employment taxes.
  • They must also deal with disputes involving contractors and agencies or will again remain liable.
  • Some end-clients will have decided to ban PSCs.

In the long run: 

  • End-clients that decide to ban PSCs will have a smaller talent pool from which to obtain work and will have to pay more for the same resource (some contractors will not accept inside roles).
 
The 'consultancy carve-out' - An alternative to 'blanket' inside decisions
 
  • The new rules apply to supplies of labour through supply chains.
  • Where 'whole services' are outsourced, the outsourcing business not the original end-client, becomes the end user.
  • This enables the outsourcing business to control the working practices to ensure continuing employment status stability; and critically; protects the original end user from liability transfer.
 
Qubix is a systems integrator and managed services company. We enable the consultancy carve-out protecting end-clients.

 

  • We can provide lower-cost solution compared to paying tax and national insurance as well as costs associated with acquiring talent.
  • Income protection and a steady flow of work for contractors
  • Unlike an agency, Qubix is already operating as a genuine consultancy company.
  • In comparison to the "Big Four" and global systems-integrators, Qubix offers unparalleled flexibility.
  • We can deliver levels of business continuity.
  • Managed services provider for critical and time-sensitive BAU support roles.

 

If you're interested in how Qubix can help your organisation with the changes to IR35, why not watch the recording of our webcast featuring subject matter expert Chris James, Chairman of the FCSA.

Watch recording and download slides: https://www.qubix.com/uk/webcast/ir35

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