DWG is Your IR35 Compliant Partner

“Only 10% of companies are satisfied with a blanket approach, and 90% stating that they would be keen to explore alternative resourcing models.” Consultancy UK.

DWG Is Your IR35 Compliant Partner

IR35 and Business Need

In April 2021, the Off-Payroll Working Legislation (IR35) went live.

Aimed at larger businesses within the private sector, it is already causing problems in resourcing, skills and capabilities, especially in high demand skills such as digital and technology.

According to a recent survey by Consultancy UK, the vast majority of large businesses have taken a blanket approach to IR35, either detailing independent contactors or consultants engagements as ‘within’ IR35 or simply not using contractors. Safe, but unsatisfactory long-term.

A solution to this critical issue is to engage mid-sized consultancies because:

  • Engagements are often via statement-of-work outcomes, with clear deliverables and timeframes. Removing ‘shadow employment’ concerns.

  • However, even if the need is defined as a ‘role’, their business characteristics remove IR35 risks, such as in the critical areas of control and substitutability.

  • Mid-sized consultancies often operate at commercial levels akin to those of the independent consultant/contractor, keeping costs the same.

Making them inherently IR35 Compliant and good value.

The information below provides more insight on this crucial topic and is a 5-minute read.

Andrew Salmon

Managing Partner

andrew salmon

IR35 Impacts | Resourcing & Projects

The main impacts to businesses who have mission-critical digital, change, or technology projects using an ‘inside IR35’ ruling on a crucial contractor or consultant are:

  • The contractor/consultant goes elsewhere.

  • You can’t hire the best people.

  • You can’t hire flexible resources quickly enough or for the duration of the project.

  • You have to hire permanent headcount, which is expensive, time-consuming and impacts financial performance.

Let alone all the additional paperwork or operational overheads.

It is no wonder most companies are looking for an alternative to the ‘blanket approach’.

Blanket Inside – There IS Another Way

In our IR35 downloadable materials, we explain why there are limited choices to solve the IR35 riddle. We explain why how mid-sized consultancies can:

  • Provide solutions to projects on a ‘statement of work’ basis

  • Supply its team members to fill a temporary role or need like a contractor or an independent consultant.

  • Offer reassurance that the consultancy is paying the right levels of taxes due for its team members. Eliminating the risk.

  • Remove the issue of a ‘sole individual’ operating in a personal service company and the associated threat of shadow employment.

  • Demonstrate IR35 safe operating approaches, with contracts to reflect those practices.

  • Remain excellent value for money, with rates akin to those of a ‘contractor’ or ‘independent consultant’.

Consultancies like DWG.

Want to Know More?

We have developed more detailed materials, available for download for:

  • End clients
  • Intermediaries – such as a recruiter.

Why Consultancies Like DWG

The legislation has been put in place to stop 'shadow employment'. Shadow employment exists when a sole person is operating with a limited business for an improved tax position. In reality, they exploit a loophole as they have all the characteristics of someone who is employed.

In summary, the status of IR35 is determined by two things:

  • The nature of the engagement

  • The nature/characteristics of the supplier

Both reflected in the very useful HMRC CEST tool.

In most cases, consultancies are going to be a safe supplier because of their operating characteristics – especially if the engagement is undertaken by a statement of work for a project outcome. But is also the case when the need is determined as a ‘role’.

Shadow Employment Characteristic Normal Consultancy
Contract
If there is a ‘contract of services’ this tends to suggest employment;Whereas a ‘contract for services’ this suggests self-employment.
Operating to a ‘statement of work’ for a project outcome is a ‘contract for services’.
Integral position
If the individual holds an integral position within the organisation, for example a chairman, he/she must be employed.
A mid-sized consultancy will not be providing solutions or people to fill an integral position.
Risk
Employees usually receive a regular wage or salary; they are paid whether or not their employer is making a profit and do not risk their own capital in the business.
A mid-sized consultancy will not have this relationship with their client.

Especially if there is no mutuality of obligation or termination periods are short or for justifiable project delivery reasons.

Control
Can the individual choose the place of work, hours of work and method? If so, he/she is likely to be self-employed.Is he/she subject to direction of another person? Does a master/servant relationship exist? If so, he/she is likely to be employed.
Mid-sized consultancies typically have full control of how the service, solution or project is performed. Usually reflected in their contracts.

Any operational control regarding the project will come from within the consultancy team.

Legal rights
Does the individual have the right to receive regular remuneration, holiday pay, redundancy pay and benefits? This can indicate employment rather than self-employment.
Mid-sized consultancies will not have this relationship with their clients, even if the service being fulfilled is a consultancy team member filling a ‘role’ for a client.
Equipment
In general, employees do not provide their own equipment but self-employed people do.
Mid-sized consultancies will be providing the equipment of their team members.
Exclusivity
In general, an employee is employed by just one employer and is an integral part of that employer’s business. Where a person works almost entirely for one organisation, there is a very strong argument for treating this person as employed.Self-employed people normally have a number of clients and are not integral to any of their clients’ businesses.
Mid-sized consultancies will generally have more than one client, and therefore, are not exclusive service providers to one client.
Substitute
An employed person cannot provide a substitute worker to do the job.
Mid-sized consultancies will have a large enough team to be able to provide a substitute.

This is further reinforced if the mid-sized consultancy is proposition-led and can prove it solves business issues via methodologies and a large and integrated team, as DWG does.

HMRC will consider a number of these factors in assessing whether an individual is employed or self-employed - but ones like legal rights, control, exclusivity and substitute - are arguable of higher weighting.

Why We Know DWG is IR35 Compliant

In the run up to the legislation and since it went live, several engagements have been subject to CEST tests. Where the answers were accurate to the situation and not pre-determined to be inside, we were 100% classified as outside. As these and other clients experienced, helping to protect and enable mission-critical projects.

There is Another Way - As These Clients Experienced

Contact

andrew salmon

Andrew Salmon

Managing Partner

Call 07801 439011
email andrew