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Good riddance to confusing freelancer rules

Good riddance to confusing freelancer rules
Opinion

This is great news for employers and talent in our industry.

 

Last week, in its “mini-Budget”, the UK Government scrapped the IR35 reforms. This is great news for the marketing industry because it enables large businesses to work much easier with freelancers and contractors.

This had been a radical change how freelancers in media and advertising were paid. The idea behind the reforms was to ensure that businesses weren’t hiring contractors to do full-time role work, and avoiding paying the proper taxes. The key change in the reform was that the responsibility for deciding whether a hire was in or outside IR35 shifted from the contractor to the business.

Every time a business wanted to hire a freelancer or contractor, they had to determine whether it was in or outside IR35. And if it was inside IR35, they had to make sure the appropriate taxes were being paid. The success or failure of the reforms would be decided by how easily and accurately businesses were able to determine whether a project was in or outside IR35.

But this is where it unravelled. The process for determining whether a hire was in or outside IR35 rapidly became a shambles, creating confusion for both talent and businesses. This ultimately proved costly, both in terms of money and time.

To figure out if a project fell inside IR35 there were four things a business needed to assess for each assignment:

Does the hire have the ‘right to substitute’?
Is the person we are hiring obliged to provide their services personally?
Do they have the right to substitute themselves with an alternative?

What are the hiring obligations ?
Does the business have to provide work and is the contractor obliged to accept ?
Is payment based on hours and time or the project deliverables ?

What control does the hire have ?
is the assignment a clearly defined project or a role ?
can the contractor choose when and when the work is done ?

Employee status
Do they use their own equipment or company equipment ?
Do they qualify for employee benefits and or have access to facilities?

 

Every time a business wanted to hire a contractor for an assignment, no matter how big or small, they needed to figure out whether it fell inside or outside IR35.

To help businesses do this the government provided a questionnaire tool. Companies were asked to use the tool to help them determine the IR35 status of the project.

The problem was that it didn’t work. In 21% of cases the tool was unable to determine an answer. That meant that a fifth of all cases were undetermined. This caused total confusion among businesses and contractors alike.

The impact of the confusion was that many large businesses pulled back on freelancer or contractor projects. All of this happened at precisely the time that businesses needed more agile approach to hiring talent — during Covid-19.

So now we are told that these IR35 reforms will be officially scrapped in April 2023. From then it will be the responsibility of the contractor to address their tax affairs and ensure they pay the correct taxes.

Scrapping the IR35 reforms will make it much easier for large businesses to engage with contractors and freelancers. As a result, it will also open up many more opportunities for contract and freelance talent.

This is great news for anyone in marketing. For agencies, brands and consultancies it enables them to become much more agile; hiring temporary talent to fill gaps, deliver short term projects, manage seasonal spikes in demand.

For freelance and contract talent, meanwhile, it opens up many more opportunities to work with larger enterprises.


Stefan Bardega is co-founder and chief growth officer of Traktion. He previously served as UK CEO and EMEA president of iProspect.

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