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IR35 rules are changing - don\'t bury your head in the sand!

If you're a private sector business who hires contractors including Quantity Surveyors to deliver construction projects - or a contractor hoping to be appointed - you can't ignore the upcoming changes to IR35, the legislation around off-payroll working.

Tax rules which have until now only applied to public sector bodies will cover private businesses from April and the implications could be huge.

If you're not familiar with IR35, it is a term which describes two sets of tax legislation that are designed to combat tax avoidance by workers and the firms hiring them. This will usually be individuals who are supplying their services to clients via an intermediary, often as a limited company, but who might otherwise be an employee if the intermediary were not used.

What does the IR35 change mean for clients hiring contractors?

From April, a company hiring a contractor will need to determine the tax status of the contractor - so clients, the responsibility is now clearly with you! But as most will not be tax experts, guidance is provided by the HMRC in the form of its tool: https://www.gov.uk/guidance/check-employment-status-for-tax. This is, however, not 100% accurate so it can only provide an indication, which of course results in grey areas and potential problems down the line.

What does the IR35 change mean for contractors supplying services through intermediaries?

Firstly, if the client (that a contractor is hoping to be appointed by) deems their tax status to be one of potential avoidance (given the use of an intermediary), they will need to employ that individual directly. This will mean employment using PAYE and paying national insurance which makes the appointment far less flexible and potentially more costly. This may also mean that the client chooses an alternative contractor as a result to avoid the hassle and future issues - simple risk avoidance by employers which could result in IR35-affected contractors being unable to win work in the first place!

How can clients and contractors avoid losing out?

Clearly accountants are the experts in this area so that is your first port of call. But if you are a contractor seeking to retain your limited company status, it is important to demonstrate that you are not too close to a client and that you retain your independence. Asking your client for a 'confirmation of arrangements' letter will help to confirm that the working relationship is a business-to-business one.

If you are a client, you need to review the terms of engagement with your contractors and make changes where necessary. One option would be to change the provider. For example, if you are seeking to appoint a Quantity Surveyor, switch to a company like Quantum CPM who are clearly outside any IR35 rules, because we are a long-established professional team who work with a wide range of customers across the UK and internationally - it's what we do.

In fact, Quantum CPM could provide clients with access to their usual Quantity Surveyor, because we are a Registered RICS Practice, enabling a successful working relationship to continue without having to deal with all that comes with IR35. We can take away that hassle for clients and ensure Quantity Surveyors can continue to work with their clients.

If you have any questions about contracts in the construction sector or how Quantum CPM could help provide a Quantity Surveying service on your next project, please call us on 0161 974 6655 or email .