IR35

We reviewed all options to solve IR35 so you don’t have to

It’s decision time on IR35, with the off-payroll legislation for private sector companies becoming law on April 6th 2021.

Mathias Linnemann

As a senior leader, whether or not you already have a solution, it’s time to look at your business and ask yourself:

What type of company are we?

For example, let’s take IR35. Do you accept a new tax law and add a mountain of paperwork, do you hire expensive auditors to understand the issue for you, or do you choose the first provider you find just to take the problem away?

Rest assured, Worksome had the same challenge. Our team landed in the UK from our Copenhagen HQ in May 2019. We asked ourselves the same question. We soon started to explore the market and reviewing the most popular solutions.

This is what we found…

In case you didn’t know, Worksome helps companies manage talent for the most exciting projects in the world – from social media teams at creative agencies, to design teams at the coolest brands, to hardcore IT workers in banks (we are told this can be a fun job too!) – so it was clear we needed to make sure we catered for this tax classification. 

The solution we have built for IR35 now solves all headaches, insures against any non-compliance, and even saves cost (instead of increasing it) for our UK customers. Book a demo here after reading our findings below:

Solutions overview

Here’s an overview of all the IR35 solutions currently available to help you make the right decision. Read on for a comprehensive overview of each IR35 option to drastically improve your contractor operation.

Worksome is building the first enterprise platform that connects companies with top independent workers all over the world. We eliminate the friction of onboarding, billing, and payment processing so top talent can focus on making the most out of their work no matter where they are.

Worksome’s easy-to-use software expands access to highly-skilled consultants for businesses who want flexibility without compromising quality. 

Get in touch, send us a message using our Intercom pop-up and ask for a demo of our IR35 solution!

Worksome is building the first enterprise platform that connects companies with top independent workers all over the world. We eliminate the friction of onboarding, billing, and payment processing so top talent can focus on making the most out of their work no matter where they are.

Worksome’s easy-to-use software expands access to highly-skilled consultants for businesses who want flexibility without compromising quality. 

Get in touch, send us a message using our Intercom pop-up and ask for a demo of our IR35 solution!

1st Option: Ban independent freelancers (PSCs)

Stop working directly with Limited Company/PSC contractors.

Easy to implement

No risk

Higher contractor rates

Impacts business agility

Negative contractor experience

Poor business reputation

No actionable data

Who does this at the moment?

So far, it seems most companies. The first were risk-averse top tier banks and financial institutions. The outcome according to IPSE has been a third going full time, and a third working via umbrella companies on increased rates, and a third leaving their jobs.

What are the issues?

It’s not a real solution and it limits your competitive advantage and agility massively. It’s a way of averting legislation that only applies to Personal Service Companies, or Limited Company contractors.

2nd Option: Use CEST

What is ‘CEST’? HMRC’s own ‘Check Employment Status for Tax’ determination tool, found on the UK government website.

Shows HMRC ‘reasonable care’ 

Additional time

Additional process

Manual onboarding

No insurance

No audit trail

No dispute management

Impacts business agility

Negative contractor experience

Remain the fee payer

Who does this at the moment?

The public sector has had the laws in action since 2014, and a handful of large private organisations have also been managing determinations with CEST.

What are the issues?

Most report a slow decision (in some cases, 19% according to their own figures, no determination at all), little to no support and very long waiting time for dispute resolution. Once determinations are made, ongoing management, storage, and administration of the decision sits back with your business – often requiring additional headcount. CEST has been defeated in the UK courts and is not seen as fit for purpose by the majority of the UK contractor population. Using CEST will not stop an audit or HMRC deciding you have used it incorrectly.

If you can take 30+ days to onboard a contractor, you might get away with it. However, if you’re an agile, competitive business wishing to use contract workers it’s not a wise choice.  

3rd Option: Buy a dedicated ‘IR35 product’

Lots of new (and some rather old) products are out there to effectively run determinations instead of CEST. These dedicated 3rd party IR35 solutions are often insured and rather costly, charging either a fee-per-determination or subscription cost to make sure your hires are covered against any HMRC investigation.

Easy to implement

No risk

Often insured

Manages disputes

Additional cost

Additional process

Impacts business agility

Negative contractor experience

No actionable data

Days or weeks for a determination

The main issue?

Worksome explored integrating with these types of products, but determinations are made and insured separately – outside of your company’s existing hiring workflow.

What does this mean?

The outcome is an expensive additional process for your company to manage and pay for. Getting technical on the tax implications, you are also often left as the fee payer – which leaves you holding full liability with HMRC.

New Option: Manage and pay suppliers using Worksome

Worksome is the only solution with IR35 determinations built into your end-to-end workflow. Using data captured when hiring contractors – with additional questions answered in-platform – insured determinations are created. Worksome then pays all contractors and suppliers compliantly, meaning risk-free, without any additional processes, time wasted, or additional headcount required.

Shows HMRC ‘reasonable care’

Saves time

Improve existing hiring workflow

Improve contractor experience

Actionable data insights

Insurance

Audit Trail

Dispute Management

Removes liability as the Fee Payer

Immediate decisions

Small additional fee

Who already does this and what is the outcome?

Upcoming legislation shouldn’t mean another additional process, and no business should be left to bear the risk of fines or penalties being imposed by HMRC from HRMC. Companies including Accenture Interactive, Lego, and McCann Worldgroup have reported huge time savings on their previous process, and a happier experience both internally and for contractors – even with the new legislation.


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