If the Public Sector client says the contractor is “caught by IR35” this will likely mean a substantial reduction in the earning potential for the individual concerned. In addition, the contractor will still incur the running costs of having their own business such as: accounting fees, business insurances, marketing and other operating costs.
As a recruitment business, you need to liaise with the Public Sector bodies you are engaging with. In some circumstances, Public Sector bodies are making blanket decisions on all contractors being caught by IR35 and whether they engage with Personal Service Companies at all.
If workers are deemed caught by IR35 it is important to calculate what this change in income will mean. Many workers will see a substantial decrease in their Take Home Pay and may no longer feel that a Personal Limited Company is the right choice for them.
IR35 changes need to be carefully communicated to the public sector workers on your books. It is important that they understand the changes and that they are given the opportunity to weigh up the options of Limited Company vs Umbrella to decide how to operate going forward. We have produced a comparison guide which you are welcome to send to your workers.
Below are a few questions to help you to determine
your operational readiness for dealing with IR35.
Do you have the resources to deliver real-time net deductions for the Personal Limited Companies you engage with?
Have you reviewed your existing contracts and determined whether new contracts need to be issued?
Have you considered the impact on assignment rates and the subsequent effect on your existing margins?
Have you spoken to your clients to see if they will bear any of the costs associated with the changes?