| They moved responsibility for determining whether a person is acting as an employee or a vendor in the vast majority of cases to the client, who must demonstrate a bunch of factors (I'm not a tax guy), not least - the "vendor's" right to substitute himself for a replacement they subcontract (via employment or otherwise) to, irrespective of the client's deemed suitability of the chosen replacement - the "vendor's" right to a significant level of autonomy, such as the ability to choose their working hours and lunches, and have high level control over their workflow - the process of determination 'employee' vs 'vendor' must be significantly documented and can be challenged in retrospect for years after completion of the contract Falling on the wrong side of a determination could leave the client liable for mandatory national insurance and pay-as-you-earn tax deductions. Now HMRC need not prosecute individual contractors, but instead clients (who may hire hundreds of contractors), making the enforcement process much more efficient for them, and much higher risk for the clients. Net result for companies: building big overnight temporary teams out of contractors e.g. for 6-12 month projects are vastly less likely to do so, for fear that at some future date, the tax man could claw back a year's worth of tax for e.g. 20 contractors on the same project, with non-compliance and late payment penalties lumped on top (which themselves increase with respect to how long it took HMRC to get around to investigating you). It could be the case (hypothetically) that it would only require one member of a team to report the inability to substitute, or the presence of a line manager, for an entire project team's worth of tax to get a question mark placed next to it. Net result for contractors: anyone who understands what's going on has either pivoted into becoming a permanent employee, avoiding the whole mess, since contracting is an expensive activity to begin with, and the premium has now been removed, or has banded with a few friends and attempted to set up "micro agencies". I've already encountered these, where substitution was advertised very early in conversation. Net result for the market: it will be all but gone by April 2020. |
However I suspect this is because _most_ of their contractors are actually just disguised employees, and I say this as a contractor myself. However the legitimate contractors are also getting hit by the backlash now that the clients are on the hook for penalties.
Personally, I'm going to keep contracting past April as I generally only work with small businesses anyway and they can see quite clearly that my contract does not fall within IR35. If however they had 100 contractors instead of say, 1-2, it's much harder to make that determination.