SAP Partner
02.17.2020

IR35 Option 1: Inside IR35

By Jonathan Hurren

Inside IR35

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If you use SAP contractors to deliver projects you will have three options to engage them after April 5th 2020 and the advent of private sector IR35. Information and FAQs on Option 1: Inside IR35 below:

With the IR35 rollout just around the corner, contracts deemed ‘outside’ the regulation are becoming an elusive unicorn for organisations and contractors in the SAP world. Facing HMRC’s strict guidelines and potential penalties for noncompliance, some businesses are choosing to blanket all contracts as ‘inside’ IR35 and convert the contingent workforce to PAYE (pay as you go) model.

This approach has become the default option for a number of UK companies, most notably GlaxoSmithKline, Lloyds, Barclays or HSBC. BP has recently joined the group with an announcement that all contractors operating via Limited Companies must go PAYE before April.

As it’s the case with any legislative changes, we believe that the devil lurks in the detail. That’s why we’ll assist all our clients and contractors with the transition and make sure business continues as usual for contracts ‘outside’ and ‘inside’ IR35.

IR35 FAQ for clients

“What happens to my project if contractors chose to walk away”?

Losing great people will put any SAP programme delivery at risk. To minimise disruption, bluewaveSELECT have identified a strong pool of SAP contractors who are open to working within IR35 and ready to be introduced to new assignments before the 6th of April 2020.

Jump over to our Client Area to learn more.

“Will I still have access to the best SAP talent”?

Yes! bluewaveSELECT will continue to connect clients with SAP contractors in the usual manner through our hidden network of experts. If you’re currently employing SAP people through Personal Service Companies (PSCs), we’ll get you back on track and fill the gaps with talent inside IR35 to support on-time programme delivery.

“What about the additional costs to contractors”?

A recent Brookson Legal survey found that 50% of contractors expect to negotiate better terms once the legislation hits the private sector. That means businesses converting to PAYE may need to consider offsetting the additional costs by offering pay increase or additional benefits that will help attract and retain top talent.

IR35 FAQ for SAP contractors

“What does it mean to be ‘inside’ IR35”?

When the legislation rolls out on April 6, 2020, businesses, instead of contractors, will become responsible for making status determinations (on-payroll vs. off-payroll) for the contingent workforce. As a result of the assessment, your contract may be considered either ‘inside’ (employee for tax purposes) or ‘outside’ (independent contractor) IR35. If it falls within, your work will be subject to PAYE terms and similar taxation to that of a regular employee.

“Will this affect my take-home pay”?

Unfortunately, HMRC’s push against the private sector is going to impact take-home pay for all contracts deemed ‘inside’ IR35. According to Contractor Calculator, the associated taxes and NI contributions can affect the final pay by around 20%.

It’s important to note that calculations will differ from contract to contract, but even if you’re caught by the legislation, you MAY not lose out too much financially if your client adjusts the rate to compensate.

Some businesses are already demonstrating a willingness to partially offset the extra cost and increase rates to retain the contingent workforce. You can also become eligible for a number of perks and employment benefits which are inaccessible for an independent contractor.

“Can I still work on contracts ‘outside’ IR35”

Yes. Even if one of your contracts is caught by the legislation and converted to PAYE, you can still engage with ‘outside’ assignments and enjoy the flexibility of working through your PSC. Status determinations are limited to a particular contract and won’t affect anything else.

Visit buewaveSELECT Candidate Area for more information.

Conclusion

As the April 6 deadline approaches, contracts ‘inside’ IR35 will soon become a norm for some clients and SAP contractors. By acting now, you can minimise the extra costs and mitigate the risk of delays hitting business-transformation programmes.  

Are you an SAP professional or Company requiring SAP expertise or advice on IR35?

Let us know at hello@bluewaveselect.com or +44 (0) 1423 559 559.

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