Despite the ups and downs over the last few months of the IR35 legislation with Kwasi Kwateng announcing a repeal of the Off-Payroll Working rules in September, which was then withdrawn a few short weeks later, there is still significant value in using Limited Company Contractors.
IR35 is still manageable by using experts in their field to help assist with compliance. Whilst HMRC has its own tool for the purposes of determining IR35, its Check Employment Status for Tax (CEST) tool has been widely criticised by the industry, and in around 30% of cases, it doesn’t provide any kind of determination. However, using alternative compliance tools such as market leaders Kingsbridge or QDOS to assist with your determination, with both the hirer and contractor required to complete questions around the working practices and contractual arrangement to help determine the result.
When engaging a contractor compliantly outside of IR35, your PAYE obligations are lower. This includes making savings on Employers' National Insurance contributions. If you are looking for somebody to provide services on a unique project for several weeks, engaging with a contractor will be more cost-effective than employing a candidate on a fixed-term contract.
When engaging a contractor outside of IR35, a client will not be responsible for employment benefits such as holiday pay, sick pay, Private Medical Cover, or providing subsidised benefits such as a gym membership or car insurance. It is understood that contractors that they are responsible for covering their own costs for sickness and holidays due to their higher day rates.
By the nature of contracting, a contractor will be engaged because they have a specialist skill set needed for a project. It is often easier to engage an expert in an area than to train a permanent resource or employ a permanent employee if the project is only short. In addition, by moving from project to project, the contractor will be bringing a wealth of experience from different sectors and industries which will bring a different perspective to your project. Contractors are likely to be able to bring fresh ideas and be more agile in providing solutions that a client may not have considered previously.
Contractors also provide a level of flexibility for clients to help manage increase workloads. The benefit of using a contractor is, that when the project comes to an end, so does the contract and therefore the cost for the additional resource comes to an end.
Contractors most certainly still have their place in the industry and should continue to be utilized. The changes in IR35 in recent years have caused a dark cloud to hover over the contracting community, however, there is still value in using contractors in your business.
If you are a client and want to find out more about the benefits of using contractors, please feel free to get in touch with us on 01892 553355 or email info@gerrardwhite.com and we will be happy to help.
