What the IR35 rollback means for businesses who hire freelancers.
Whilst the liability might have rolled-back, the responsibility and opportunity to work more effectively with freelancers still exists for clients.
If you’ve read over the weekend that IR35 has been repealed — you might be forgiven for thinking that as a client, you no longer have any obligations to worry about whether working with freelancers is within or outside IR35.
For the avoidance of doubt IR35 still exists! But it’s rather who has responsibility for determining whether a contract is inside or outside of IR35 has shifted back from payer to supplier.
Companies who work with freelancers in recent years have had to go through the painful process of implementing new steps in hiring external and independent talent to collaborate with — namely validating whether a contract falls inside or outside of IR35. For many businesses, this was costly, has added additional burden to working with freelancers — in the most extreme cases, some put an outright halt on working with contractors, and for others, it has prevented companies truly engaging with their freelancers in a meaningful way, for fear of being “at risk of IR35”.
The September mini-budget has rolled back these changes — so that the ‘determination’ once again falls back to the freelancer, or rather, it’s the freelancers responsibility to ensure they’re working in a way that doesn’t fall within IR35, and the liability has shifted from the payer to the supplier.
Whilst that might sound like a huge positive for clients — it doesn’t mean that throwing all of your process out of the window is the right move. Working with freelancers is a hugely beneficial partnership to your business, and having a good start to a project helps everyone to do their best work together.
1/ Keep your determination process in place — if you already have a process where you’re looking at how you work with freelancers, and consistently you’re seeing that your contract and ways of engaging with freelancers clearly would mean the project falls inside IR35 — let the freelancer know. Whilst you don’t have the liability here — help them be aware of the implications. This might also mean changing some of the ways in which you work with freelancers — i.e. avoiding setting their working hours or demanding where they work from. IR35 hasn’t gone away, and you can help your freelancers understand the implications of working with you. HMRC are likely to shift their focus on chasing suppliers now — and helping your most talented and trusted freelancers not get caught up into investigations by avoiding any behaviours which put them at risk, is still of benefit to you.
2/ Keep the early intervention in place — whilst additional administration burdens might have been painful, having a moment in the process where you clearly define the project goals and ways of working, a well defined and fair contract, a process to onboard the freelancer into your organisation, and a review process of who you are working with, are all positives for both sides of the relationship. The time you might save on reviewing IR35 status of contracts can be re-invested into better onboarding and engagement with your freelancers — or look at where you can improve working with freelancers at others stages in the project plan, such as dealing more effectively with invoices.
3/ Keep the responsibility in place — one of the few positives that came from the changes to IR35 meant that internal accountability for relationships with freelancers became clearer. Someone had to take responsibility for putting IR35 changes in place. Make sure that internal accountability is maintained, and give that individual a role which now looks at building closer relationships with freelancers, rather than aiming to keep them at arms length to reduce risk. Look at ways you can develop a “Chief Freelance Officer” type role who goes beyond just contract review, but creates the best possible relationships with your extended workforce.
4/ Consider how it unlocks your ability to engage with your freelancers — many organisations used IR35 as a reason why they could not offer their freelancers a better experience. Avoiding doing anything which looked like they were supporting independent partners in case it seemed like disguised employment — or simple confusion over what was and wasn’t allowed — with the most common risk-averse strategy being: do nothing. With the liability falling back to freelancers — you’re freer to offer support and access to things like resources and community, and the individual is able to decide whether or not to engage. It’s also worth remembering that IR35 applies to contracts, not people — so engaging with individuals when they’re not working with you is not a crime!
5/ Take this as an opportunity to review how you work with freelancers — it’s not often that we are encouraged to review our policies and ways of working with external talent. It’s often forced, but this change removes some of the obligations from clients, and creates space for you to reconsider how you work with freelancers — how can you build more effective networks of specialist that you can call upon, how can you augment your teams rather than just plugging gaps, how can you grow a community that extends your business proactively?
As we continue with the backdrop of a hiring crisis and financial challenges for both businesses and individuals — finding ways to create a more flexible and fluid workforce which embraces working well with freelancers is a sensible strategy, and changes in legislation act as a great moment to consider what your future fluid workforce might look like.